Substitution effect and income effect to predict

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For each of the following events, consider how you might react. What things might you consume more or less of? Would you work more or less? Would you increase or decrease your saving?

a. You have a very close friend who lives in another city, a 3-hour bus ride away. The price of a round-trip ticket rises from $20 to $45.

b. You receive an award that pays you $300 per month for the next 5 years.

c. The price of food doubles.

Reference no: EM1368584

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