Use your electronic device or pen and paper to draw the appropriate economic models. Be sure to label all you axis, curves, prices, and quantities. Once you are done, upload your work to the discussion board.

Questions:

1. Bananas are a normal good, using indifference curve analysis, illustrate the substitution and income effect following an increase in the price of bananas. Assume the price of the alternative good remains constant.

2. Ramen noodles are an inferior good, using indifference curve analysis, illustrate the substitution and income effect following a decrease in price of noodles. Assume the price of the alternative good remains constant.

3. Using indifference curve analysis, derive the individual demand curve for pizza following a decrease in price for pizza. Assume the price of the alternative good remains constant.

Answer rating: 100% (QA)

1 Bananas A Normal Good Substitution Effect As the price of bananas increases consumers will substitute towards the relatively cheaper alternative goo... View the full answer