You consume only soda and pizza. One day, the price of soda goes up, the price of

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You consume only soda and pizza. One day, the price of soda goes up, the price of pizza goes down, and you are just as happy as you were before the price changes.

a. Illustrate this situation on a graph.

b. How does your consumption of the two goods change? How does your response depend on income and substitution effects?

c. Can you afford the bundle of soda and pizza you consumed before the price changes?

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Principles of economics

ISBN: 978-0538453042

6th Edition

Authors: N. Gregory Mankiw

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Question Posted: Dec 14, 2012 05:53 AM

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You consume only soda and pizza. One day, the price of soda goes up, the price of

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a Figure shows the effects of these price changes If you are equally happy you will remain on the s...View the full answer

Principles of economics

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