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Suppose two goods, bread and cheese, provide a consumer with utility but only if they are...

Suppose two goods, bread and cheese, provide a consumer with utility but only if they are consumed in fixed proportions. What will an increase in the price of bread yield in terms of substitution and income effects? Explain if either effect will suffice and what direction they will be in (different or similar direction).

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There will be no substitution effect as it leads to change in proportions of quantities consumed.But when other quantities are considered substitution effect will be negative since Consumer will like to buy those commodities whose relative price is now lower. However there will be income effect which will decrease quantity consumed of both goods because consumer can now buy less bread(and thus he will also buy less cheese) . Thus income effect suffices.

Income effect is negative and substitution effect is also negative So they will be in same direction.

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