Goods 1 and 2 are perfect complements. and a consumer always consumes them in the ratio of
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Goods 1 and 2 are perfect complements. and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $120 and if the price of good 2 changes from $3 to $4, while the price of good 1 stays at $1, then the income effect of the price change
a) is 4 times as strong as the substitution e ect.
(b) does not change demand for good 1.
(c) is exactly twice as strong as the substitution e ect.
(d) accounts for the entire change in demand.
(e) is 3 times as strong as the substitution effect.
how is the ratio 2x1=x2?
Expert Answer:
The ratio 2 units of good 2 per unit of good 1 means that the consumer always consumes twice as much ... View the full answer
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