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Business, 05.12.2019 01:31 rockabillyEli689
Charlie consumes apples and bananas. his utility function is u(xa, xb) = xax2b. the price of apples is $1 the price of bananas is $2, and his income is $30 per week. if the price of bananas falls to $1 group of answer choices the income used to calculate the substitution effect is higher than his original income, since the change made charlie better off. the substitution effect of the fall in banana prices reduces his apple consumption, but the income effect increases his apple consumption by the same amount. more than one of the above is true. the substitution effect of the fall in the price of bananas reduces his banana consumption but the income effect increases his banana consumption by enough so that his banana consumption rises. charlie demands fewer apples and more bananas.
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Charlie consumes apples and bananas. his utility function is u(xa, xb) = xax2b. the price of apples...
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