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Sarah spends all of her income on apples and pears. She thinks that apples and pears are perfect substitutes; one apple is just as good as one pear. Apples cost $4 a unit and pears cost $5 a unit. 3.1. If the price of apples decreases to $3 a unit, will Sarah buy more of them? What part of the change in consumption is due to the income effect and what part is due to the substitution effect? 3.2. If the prices of apples and pears are respectively pa = $4 and pp = $5 and if Sarah has $120 to spend, draw her budget line in blue ink. Draw the highest indifference curve that she can attain in red ink, and label the point that she chooses as A. 3.3. Now let the price of pears fall to $3 a unit, while the price of apples does not change. Draw her new budget line in black ink. Draw the highest indifference curve that she can now reach with red ink. Label the point she chooses now as B. 3.4. How much would Sarah's income have to be after the price of pears fell, so that she could just exactly afford her old commodity bundle A? 3.5. When the price of pears fell to $3, what part of the change in Sarah's demand was due to the income effect and what part was due to the substitution effect?
Excise tax is levied on the buyers of a good, then after the tax buyers will pay for each unit of the good.
Calculate the purchasing power parity exchange rate between the Swiss franc and the dollar. Based on your calculation, is the SF overvalued or undervalued.
After school one day, the teacher discovers this student beating up another student and has to break up the fight. The teacher has turned to you as the vice principal in charge of discipline. Using the theories you have learned this week what do y..
An HR manager comes with an matter symptomatic of an underlying problem. He says which levels of employee motivation in his organization are dropping leading to drop in employee productivity.
Provide an example of a specific industry that you believe fits the model also elucidate your rationale.
Despite the absence of patent protection, Semi-Salt has averaged accounting profits of 5.5 percent on investments since it began producing polyglutamate-a rate comparable to the average rate of interest that large banks paid on deposits over this ..
suppose you are considering growing and selling maize. Illustrate what is the profit maximising out put.
What kind of goods are gasoline and road deaths. How might this impact how we evaluate increases in gasoline prices.
Which of the two nations has better prospects for the future and why. Provide a reasoned opinion.
Explain is a high degree of market concentration a boon or threat to consumers. What is the strongest argument on either side.
This statistic elucidates how that government antimonopoly strategy has been applied more harshly to the textile industry than to the automobile business.
Policymakers should have a detailed knowledge and profound understanding of all theoretical models and should design economic policy based on that knowledge.
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