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- Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates that smokers with incomes in the lower half of all incomes respond to a given price increase by reducing their purchases by amounts that are more than four times as large as the purchase reductions made by smokers in the upper half of all incomes. How can the income and substitution effects of a price change help explain this finding?Define The income and substitution effects.What happen to the marginal rate of substitution as we move along the non linear indifference
- Can you explain why taking a monotonic transformation of a utility function doesn’t change the marginal rate of substitution?A consumer's demand function for some good x is x=0,01m-2p, where m is income and P, is a good's price. Initially p,-20, 8000. Now assume that the price rises to p= 30 Calculate the income and substitution effects. Hint: you can use Slutsky approach, not Hicks.How do we find Substitution effect and Income effect in this equation?
- 509 UNIT 1 ASSIGNMENT ECON 509 UNIT 2 ASSIGNMENT X PDF ars/Jo.. Tp AN Read aloud V Draw Highlight ECON 509 ASSIGNMENT UNIT ONE Answer All questions 1) a) Given the following typical utility curves determine whether they have convex indifference curves (that is, whether the Marginal Rate of Substitution declines as x increases). U(x. y)-x² -y? b) Given the following Constant Elasticity of Substitution production function, show whether or not it is homogeneous, and the scale it exhibits. Q = [L² + K']^ 2) Prove that the polynomial P(x) = -2x3 + 2x2 + 10x+ 6 has a zero at x 3, and factor the polynomial. %3D 3) The demand and supply functions for two related goods; jeans (x) and shirts(y). are given byexplain the relationship between substitute goods and original goods whether its a positive or negative relationship, do the same with complementary goods as well.How is utility maximization obtained in the competitive factor market? Explain your answer. b. Explain, why are goods not distributed efficiently among consumers if the marginal rate of technical substitution is not equal to the marginal rate of substitution of consumers?