Question

Suppose that Jim uses his budget to purchase 100 units of Good X and 100 units of Good Y. When the price of Good X rises, he purchases 50 units of Good X and 95 units of Good Y. An economist calculates his compensated budget and finds that in that scenario, Jim would buy 80 units of Good X and 105 units of Good Calculate the income effect (Remember to include a negative sign()it the effect reduces the quantity) Answer: Check Suppose that Jim uses his budget to purchase 100 units of Good X and 100 units of Good Y. When the price of Good X rises, he purchases 70 units of Good X and 95 units of Good Y. An economist calculates his compensated budget and finds that in that scenario, Jim would buy 80 units of Good X and 105 units of Good Y. Calculate the substitution eftect (Remember to include a negative sign-) # the effect reduces the quantity) Answer Check Suppose that a consumer had a budget of $14 to spend on Good X and Good Y. The price of Good X is $5 and the price of Good Y is $2 The store selling Good X is offer a deal where you can buy one unit of Good X and get the next unit of Good X that you buy for 40% of the original price. Determine the X-intercept of the budget line for the consumer in this situation. Answer Check