Business
Business, 20.10.2021 21:40, Animallover100

Emily consumes only two goods, water and food. Her initial utility maximizing bundle is illustrated below. Assume: 1. the price of food doubles
2. water is an inferior good to Emily.

Illustrate the new budget constraint and a new utility maximizing bundle consistent with these two assumptions. Determine, the income and substitution effects for both goods and label these effects on the axes.

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Answers: 2

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Emily consumes only two goods, water and food. Her initial utility maximizing bundle is illustrated...

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