Suppose That Sonya Faces An Increase In The Price Of Pasta As Depicted Below Moving Her From An Optimum Bundle Of Rice 1 (39.68 KiB) Viewed 14 times
Suppose That Sonya Faces An Increase In The Price Of Pasta As Depicted Below Moving Her From An Optimum Bundle Of Rice 2 (22.27 KiB) Viewed 14 times
Suppose that Sonya faces an increase in the price of pasta, as depicted below, moving her from an optimum bundle of rice and pasta at A to an optimum bundle at B. (20 points) Quantity of pasta (cups) 10 9 8 7 5 3 2 O BC1 BC2 O N A B A' 3 4 Quantity of rice (cups) 5 6 7 4 % U 2 ВС' 9 10
1. What is the total effect of the price change on Sonya's demand for pasta (as a number)? (4 points) 2. What is the substitution effect of the price change on pasta (as a number)? (4 points) 3. Is pasta an ordinary or Giffen good? Explain why. (4 points) 4. What is the income effect of the price change on pasta (as a number)? (4 points) 5. Is pasta a normal or an inferior good? Explain why. (4 points)
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