Effects of the price change on the consumption of food

Assignment Help Management Theories

Reference no: EM131247168

Rick purchases two goods, food and clothing. He has a diminishing marginal rate of substitution of food for clothing. Let x denote the amount of food consumed and y the amount of clothing. Suppose the price of food increases from to On a clearly labeled graph, illustrate the income and substitution effects of the price change on the consumption of food. Do so for each of the following cases:

a) Case 1: Food is a normal good.

b) Case 2: The income elasticity of demand for food is zero.

c) Case 3: Food is an inferior good, but not a Giffen good.

d) Case 4: Food is a Giffen good.

Reference no: EM131247168

Questions Cloud

Draw a graph to show the price consumption curve : If the demand for a product is perfectly price inelastic, what does the corresponding price consumption curve look like? Draw a graph to show the price consumption curve.

Graph the value of a call option : Graph the value of a call option (vertical axis) against a, the instantaneous standard deviation of the returns on the underlying asset;- What are the conditions under which an American put would be exercised early on a stock that pays no dividends?

Can both goods be luxury goods : Some texts define a "luxury good" as a good for which the income elasticity of demand is greater than 1. Suppose that a consumer purchases only two goods. Can both goods be luxury goods? Explain.

Illustrate this pattern of consumption : Scott consumes only two goods, steak and ale. When the price of steak falls, he buys more steak and more ale. On an optimal choice diagram (with budget lines and indifference curves), illustrate this pattern of consumption.

Effects of the price change on the consumption of food : Rick purchases two goods, food and clothing. He has a diminishing marginal rate of substitution of food for clothing. Let x denote the amount of food consumed and y the amount of clothing

Difference between costs in the short run and long run : Outline the importance of value maximization in the theory of the firm - Describe how factors, other than price, impact on demand and distinguish between changes in the quantity demanded and changes in demand.

Differences between charismatic and transactional leadership : In order to deploy the most appropriate style, one must understand the similarities and differences. For this assignment, analyze the similarities and differences between charismatic and transactional leadership and relate the effectiveness of eac..

Define how the team will communicate with each other : Define how the team will communicate with each other and share information. Also specify how meetings will be documented and where subsequent resources will be stored for ease of access

Draw a pair of budget lines and indifference curves : What must always be true about Reggie's income and substitution effects as the result of a change in the price of shelter?

User Account

All Pages