Multiple Choice
Cindy consumes goods x and y.Her demand for x is given by x(px, m) = 0.05m =5.15px.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
Correct Answer:
Verified
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