.A consumer splits their income equally between two goods. If the price of one good increases by 10% and their income increases by 5%, show that the consumer’s optimal consumption bundle will change despite them being able to afford their original bundle
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Expert's answer
2018-05-03T09:22:07-0400
If the price of one good increases by 10% and their income increases by 5%, then the consumer’s optimal consumption bundle will change, because now the consumer will buy more of the second good, as it becomes comparatively cheaper.
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