Cindy Consumes Goods X and Y

Cindy consumes goods x and y. Her demand for x is given by x(p_x, m) = 0.05m -5.15p_x. Now her income is $419, the price of x is $3, and the price of y is $1. If the price of x rises to $4 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then

A) DI = -0.28 and DS = -0.52.
B) DI = -0.28 and DS = -4.88.
C) DI = -0.52 and DS = -0.52.
D) DI = 0 and DS = -2.00.
E) None of the above.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free