Question

Bob and Cho Iverson live in San Francisco and enjoy going out to fancy restaurants for dinner and to diners for breakfast. On the following diagram, the purple curves I1 and I2 represent two of their indifference curves for fancy dinners and diner breakfasts. They have $1,000 per month available to spend on eating out. The price of a diner breakfast is always $10. Each labeled point represents the tangency between a budget constraint and the corresponding indifference curve.

9. Income and substitution effects Bob and Cho Iverson live in San Francsco and enjoy going out to fancy restaurants for dinner and to diners for breakfast. On the following diagram, the purple curves 1 and I2 represent two of their indifference curves for fancy dinners and diner breakfasts. They have $1,000 per month available to spend on eating out. The price of a diner breakfast is always s10. Each labeled point represents the tangency between a budget constraint and the corresponding indifference curve. 70 50 Lust' 30 BC Bc2 FANCY DINNERS

Answer 1

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