A consumer splits their income equally between two goods. If the price of one good increase by 10% and their income increases by 5%, show that the consumer’s optimal consumption bundle will change.
Please answer a particular question with the help of graph
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Expert's answer
2019-05-15T09:58:04-0400
If the price of one good increase by 10% and their income increases by 5%, then the quantity of the first good consumed will decrease and the quantity of the second good consumed will increase as a result of the price and income effects.
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