Suppose Jim considers orange and apple to be perfect two-for-three substitutes and spends $60 income only on these two goods

Macroeconomics

only one question

.Suppose Jim considers orange and apple to be perfect two-for-three substitutes and spends $60 income only on these two goods. Orange costs $4/lb, while apple costs $2/lb. Find Jim’s optimal consumption bundle. What will be the income and substitution effects of an increase in the price of apple to $4/lb? What will be Jim’s optimal consumption bundle after the increase in the price of apple to $4/lb?

Answer preview……………………..

Income = $60

Oranges = O

Apples = A

Perfect two for three substitutes is denoted by

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