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Utility from the consumption of food and clothing

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Reference no: EM132492278

Consider an individual who obtains utility from the consumption of food and clothing. Their current level of income is $20,000.

a) Explain how the individual chooses how much of each good to consume.

b) Suppose the price of food decreases by 15%, how will the individual's utility and demand for clothing be affected?

c) For this example, discuss the substitution and income effect.

Reference no: EM132492278

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