Define The income and substitution effects.

Find Kramer's marginal rate of substitution

Larissa consumes at a point on her budget line where her marginal rate of substitution is less than the slope of her budget line (MRS_X,Y < PX/PY). As Larissa moves toward her optimum consumption bundle, her marginal rate of substitution MRS_X,Y will OA. fall. B. rise. OC. stay the same. OD. It is impossible to tell what Larissa's MRSX,Y will do without further information. Reset Selection

m a) The demand for biscuits is given by x₁ The income the 5p₁ individual earns is K150. The price of biscuits is K5. Assume that the price of biscuits drops to K3. calculate the total change in demand. b) How much of the total change in demand can be explained by the substitution and income effect?

Why do we decompose the price effect into income and substitution effects?

Consider an indifference curve for someone deciding how to allocate time between work (and thus consumption) and leisure. Suppose the wage increases. An increase in the wage rate results in a    substitution effect for consumption. If consumption is a normal good, an increase in the wage rate results in a    income effect, but if consumption is an inferior good, the income effect is    .   True or False: The person's consumption may fall as a result of the higher wage if consumption is an inferior good. True   False

If Porsha view 3 glasses of juice as a perfect substitute for one cup of soda and vice versa, what is her marginal rate of substitution between juice and soda?

Consider the increase in the price of a can of soda and assume that soda is a normal good. Describe how the income and substitution effects impact on the demand for the cola if its price increases. Also describe how these two effects interact for inferior goods if there is a fall in the price of the good. Use bullet points

Suppose that a decrease in solar panel prices leads to an increase in a consumer’s demand for solar panels. How could you decompose the increase in demand into an income and substitution effect?

Make a curve of the budget line curve with the Indifference curve, make a separation between the substitution effect and the income effect Continue to make the demand curve decrease