Answer to Question #289106 in Microeconomics for Dia

Question

A consumer has an income of $3000. Wine costs $3 per giass and cheese.an inferior good costs $10 per pound. The price of cheese fails from $10 to $6 while the price of wine remains the same, If the income remains constant, what wil happen to the consumption of wine and cheese Decompose into income and substitution effect

Answer 1

If the price of cheese falls from $10 to $6 while the price of wine remains the same, then if the income remains constant, the consumption of wine will increase and the consumption of cheese will decrease.