The substitution effect or diminishing marginal utility

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Consider each of the following scenarios and determine whether it is an example of the income effect, the substitution effect, or diminishing marginal utility.

a. Sasha likes to treat herself to a small latte each afternoon. On Wednesdays, when the coffee shop decreases the price of lattes, Sasha buys a large latte instead.

b. The price of chicken nuggets rises from $3 to $3.50 for a box of six. The price of hamburgers stays the same. Mateo used to eat chicken nuggets three times a week. All else equal, he now eats them twice a week.

c. Jack offers Victoria a plate of a dozen chicken wings. Victoria enjoys the first wing the best, the second wing a little bit less, and by the seventh wing, she has had enough and chooses not to eat the remaining five wings.

Reference no: EM131196404

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