Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $720 and if the price of good 2 changes from $8 to $9, while the price of good 1 stays at $1, then the income effect of the price change is exactly twice as strong as the substitution effect. is 8 times as strong as the substitution effect. accounts for the entire change in demand. is 9 times as strong as the substitution effect. does not change demand for good 1

Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 5CQQ
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Goods 1 and 2 are perfect complements, and a consumer always consumes them in
the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of
$720 and if the price of good 2 changes from $8 to $9, while the price of good 1
stays at $1, then the income effect of the price change
is exactly twice as strong as the substitution effect.
is 8 times as strong as the substitution effect.
accounts for the entire change in demand.
is 9 times as strong as the substitution effect.
does not change demand for good 1
Transcribed Image Text:Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $720 and if the price of good 2 changes from $8 to $9, while the price of good 1 stays at $1, then the income effect of the price change is exactly twice as strong as the substitution effect. is 8 times as strong as the substitution effect. accounts for the entire change in demand. is 9 times as strong as the substitution effect. does not change demand for good 1
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