Assume the price of good A goes up and the consumer decreases purchases of good A and decreases purchases of all other goods. How might you explain this lack of substitution into other goods? The indifference curve for good A and other goods must be linear The income effect is greater than the substitution effect Good A is a luxury item Good A is inferior

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A: The indifference curve refers to the graphical representation of different combinations of two goods…

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A: The utility is the amount of satisfaction received from the consumption of a good or service.

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A: Py = 20 , px = 30 , px' = 10 and M=90

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A: Answer- (A)   That is both increases

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Q: indifference curve at utility level equal to 20 is?

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A: lets solve part 1 and part 2 in the following steps

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Q: John has a utility function for goods x1 and x2 which is represented by u(x1,x2)=x10.2x20.8. Assume…

A: MU1 = u/x1 = 0.2 x (x2 / x1)0.8 MU2 = u/x2 = 0.8 x (x1 / x2)0.2 MRS = MU1 / MU2 = (0.2 / 0.8) x (x2…

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A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

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A: In economics, and in particular in consumer choice theory, the substitution effect is one aspect of…