Suppose two goods coffee and cream provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield a substitution effect and an income effect in opposite direction. a substitution effect and an income effect in the same direction. a substitution effect but no income effect. an income effect but no substitution effect
Suppose two goods coffee and cream provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield a substitution effect and an income effect in opposite direction. a substitution effect and an income effect in the same direction. a substitution effect but no income effect. an income effect but no substitution effect
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 13SQ
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Suppose two goods coffee and cream provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield
- a substitution effect and an income effect in opposite direction.
- a substitution effect and an income effect in the same direction.
- a substitution effect but no income effect.
- an income effect but no substitution effect
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