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Problem:
(a) Explain with the help of a diagram, the effect on a consumer's equilibrium, of an increase in the price of commodity X while the consumer's money income and price of commodity Y remains unchanged.
(b) If the government intends to restore the consumer's current welfare to its original level, illustrate how would the process of income compensation proceed to realise that objective.
No new substitutes for the commodity If some new substitutes for a commodity appear in the market, its demand normally declines. This is quite natural, since with the availabil
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