+1-415-670-9189
info@expertsmind.com
Determine substitution effect-income effect-total effect
Course:- Business Economics
Reference No.:- EM13891944




Assignment Help
Assignment Help >> Business Economics

Let the consumer begin in utility maximizing equilibrium at point A on indifference curve I. Next the price of good X changes so that the consumer moves to a new utility-maximizing equilibrium at point B on indifference curve II.

a. Write the linear demand equation for good X. Sketch the demand curve for good X.

b. Calculate the price elasticity of demand for good X between the two prices on the demand curve. Describe the price elasticity of demand for good X between the two prices.

c. Determine the substitution effect, income effect, and total effect. Explain your answer.

d. Calculate the income elasticity of demand for good X. Is good X a normal or inferior good. Explain.

e. Calculate the cross price elasticity of demand between the two goods. Are the two goods substitutes or complements? Explain.

f. Write the linear generalized demand function for good X.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Describe the ways in which international business has changed over the last 50 years. Include the concepts of an MNC and the different types of foreign investment. Give specif
Consider the role of discount rates in problems involving long time horizons. Suppose that a particular emission abatement strategy would result in a 50 billion reduction in d
If you are in charge of writing a strategic plan for our national environmental policy (EPA head?), what would your main areas of importance (water? Energy? Farming?...) what
What is the European Union? How do debt problems in Greece and Spain affect the European Union as a whole and its member countries? What are the potential political implicatio
Suppose that initially the money supply is $4.0trillion, the price level equals 4.00, the real GDP is $6.0 trillion in base-year dollars and income velocity of money is 6. T
Robert’s New Way Vacuum Cleaner Company is a newly started small business that produces vacuum cleaners and belongs to a monopolistically competitive market. What are the prof
You are the international manager of a US business that has just developed a revolutionary new personal computer that can perform the same functions as existing PCs but costs
If the price of donuts increases. What happens to the price and quantity of coffee? How would you show an increase in technology for both goods using a production possibility