Question: Can you please help me with QUESTION C ONLY. It is very important that you explain you answers and how you get and also make

Can you please help me with QUESTION C ONLY. It is very important that you explain you answers and how you get and also make reference to any economic themes when they are use. Thank you for any help you give me I will leave a fantastic review! Many thanks :)

Can you please help me with QUESTION C ONLY. It is very

Suppose that the preferences of a consumer regarding the consumption of goods q1 and q2 are represented by function: U (q1, 92) = 291 + 92 where q1 2 0, q2 2 0. Suppose also that the consumer is endowed with some disposable income Y > 0 and faces prices p1 and p2 respectively for goods x1 and x2. a. What is the nature of the goods in the eyes of the consumer? Provide a real world example. [10 marks] b. Draw a diagram reporting the indifference curves representing the preferences of the consumer and the budget line. Also, derive and describe the demand functions of the consumer for goods q1 and q2. Draw the diagram for the demand function of good q1. [20 marks] c. Suppose that p1>2p2. Suppose that p2 decreases. With the use of a diagram, describe how the quantity demanded of q2 changes and decompose the new demand in terms of income and substitution effects. [20 marks]

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!