Multiple Choice
Maude thinks delphiniums and hollyhocks are perfect substitutes, one for one.If delphiniums currently cost $2 per unit and hollyhocks cost $3 per unit and if the price of delphiniums rises to $7 per unit,
A) there will be no change in the demand for hollyhocks.
B) the income effect of the change in demand for delphiniums will be bigger than the substitution effect.
C) 1/5 of the change will be due to the income effect.
D) the entire change in demand for delphiniums will be due to the substitution effect.
E) 4/5 of the change will be due to the income effect.
Correct Answer:
Verified
Correct Answer:
Verified
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