Price-consumption curve is horizontal

Assignment Help Business Economics

Reference no: EM13896652

Maisha spends all her income on good X and good Y. As the price of good X increases while the price of the price of good Y remains fixed, Maisha’s price-consumption curve is horizontal.

a) Let the price of good Y be $1 per unit and Maish’s income be M. Draw the diagram that illustrates the situation described above.

b) How does Maisha’s expenditure on good X respond to changes in the price of good X?

c) Is good X a complement or a substitute for good Y? Explain.

d) What is Maisha’s price elasticity of demand for good X? Explain.

Reference no: EM13896652

Questions Cloud

Use the long-run model of a small open economy : In September 1995, Patrick Buchanan, a Republican candidate for U.S. president, proposed a 10 percent tariff on Japanese imports to the United States, a 20 percent tariff on Chinese imports to the United States, and an unspecified “social” tariff on ..

Consumers valuation of the good : If a producer offers a price that is below a consumer's valuation of the good, the consumer:

Characterized by the model of monopolistic competition : Suppose that the automobile industry in Japan can be characterized by the model of monopolistic competition. Assume the following values for the parameters of the demand and cost fuction: assuming that annual sales of automobiles are equal to 900,000..

The initial cost of a pickup truck : The initial cost of a pickup truck is $12872 and will have a salvage value of $3523 after five years. Maintenance is estimated to be a uniform gradient amount of $191 per year, with zero dollar for first year maintenance. The operation cost is estima..

Price-consumption curve is horizontal : Maisha spends all her income on good X and good Y. As the price of good X increases while the price of the price of good Y remains fixed, Maisha’s price-consumption curve is horizontal. Let the price of good Y be $1 per unit and Maish’s income be M. ..

Business cycles are unpredictable : Which of the following facts is NOT true? Business cycles are unpredictable. As output falls, inflation increases. Business cycles come at irregular intervals. As output increases, cyclical unemployment decreases

What is the trade-off of energy drinks in terms of gasoline : Miley Cyrus, under the conditions of a court order, is required to enroll Summer session at Kardashian College. She is granted $50 a week to spend: either on energy drinks at $2.50 each or on gasoline for her Bentley at $4.00 per gallon. In part a), ..

Marginal rate of substitution of a slice of pizza : Luke has $16 to spend on his lunch at his school cafeteria every week. A slice of pizza (P) costs $2 and a submarine sandwich (S) costs $4. Luke likes an average more than extremes. Draw an indifference curve diagram (place pizza on the horizontal ax..

Are coordination costs and contracting costs higher : Major soft drink companies have begun to phase out their previous system of marketing their product through independent bottlers and moved toward company-owned distribution systems. One issue is the coordination of pricing and marketing in the two ty..

User Account

All Pages