What is the effect of the price change on the new bundle

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Assume a constant marginal rate of substitution at 6 for all possible consumption bundles (the bundle includes only goods 1 and 2). Although the price of good 1 decreased from the previous equilibrium, the ratio P1/P2 is still greater than 6 (as it was previously). What is the effect of the price change on the new bundle? What can you say about substitution and income effect?

Reference no: EM131425987

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