Consider an endowment setting where (w₁,w2) = (1, 1). Assume that 1, 2 are ordinary goods. 1 is an inferior good and is

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Consider An Endowment Setting Where W W2 1 1 Assume That 1 2 Are Ordinary Goods 1 Is An Inferior Good And Is 1 (32.48 KiB) Viewed 62 times

Consider an endowment setting where (w₁,w2) = (1, 1). Assume that 1, 2 are ordinary goods. 1 is an inferior good and is a normal good. Draw a diagram of Slutsky decomposition of a price decrease. The rotation/shifts of the budget line • The optimal bundle before the price change (A) • The optimal bundle after accounting for only the substitution effect (B) • The optimal bundle after accounting for also the ordinary income effect (C), • The optimal bundle after accounting for the endowment income effect (D) Skip the indifference curves.