Suppose that the price of cola rises to $3.00 a can and the price of popcorn and
Question:
a. What is the substitution effect of this price change and what is the income effect of the price change?
b. Is cola a normal good or an inferior good? Explain.
Sara€™s income is $12 a week. The price of popcorn is $3 a bag, and the price of cola is $1.50 a can. Figure 9.14 shows Sara€™s preference map for popcorn and cola.
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a The substitution effect ...View the full answer
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