Sally eats at the local burger restaurant. Suddenly the restaurant lowers its prices. A - In response to the low prices of burgers, Sally reduced her visit to the pizzeria. Can we know from this whether pizza was a bad product for Sally or not? B - Suppose instead that, in response to the drop in burger prices, Sally goes to the burger restaurant a lot Explain how this might happen in terms of income and substitution effects (using the concepts of normal and inferior goods)?

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

Question #3 Please explain what are the substitution and income effects (a detailed response is expected). Mark consumes two goods apples and oranges. If the price of orange increases from $2 to $4 and orange is an inferior good, please illustrate graphically the income and substitution effects. Please label your diagram carefully and provide explanation. Qd = 3300 – 2P and Qs = 500 + 8p Solve for: Price, Quantity and Market equilibria

Define the law of diminishing marginal utility. Given an individual’s income and the prices of two or more goods, explain and demonstrate how an individual chooses between the two or more goods in order to maximize total utility. Define the equimarginal principle and explain the logic behind it. Explain how the equimarginal principle can be used to determine the optimal amount of security guards versus helicopters to employ to prevent illegal border crossings.

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

Which of the following statements is true for a Giffen good?   (a) Following a fall in the price of the good, there will be a decrease in the quantity demanded due to the substitution effect; an increase in the quantity demanded due to the income effect; the substitution effect will outweigh the income effect. (b) Following a fall in the price of the good, there will be an increase in the quantity demanded due to both the substitution and income effect and the two effects will therefore reinforce each other. (c) Following a fall in the price of the good, there will be an increase in the quantity demanded due to the substitution effect; a decrease in the quantity demanded due to the income effect; the substitution effect will outweigh the income effect. (d) Following a fall in the price of the good, there will be an increase in the quantity demanded due to the substitution effect; a decrease in the quantity demanded due to the income effect; the income effect will outweigh the…

For Sara, ramen noodles are a normal good, however Sean considers ramen noodles to be inferior. If Sara and Sean have the same amount of income, Sean's demand for ramen noodles will be less price elastic than Sara's. Please explain why in detail using the substitution effect and income effect graphs.

. Matilda is downloading music and videos from an online site. She is currently buying three music downloads that cost $3 each and two video downloads that also cost $3 each. The table below indicates what she reports as the marginal utility of the last music download and of the last video download in this combination of purchases.      Quantity Price per Download MU per download Music downloads 3 $3 60 Video downloads 2 $3 45   As an assignment for her Microeconomics course, Matilda used the marginal utilities that she gave to her 3rd music download and her 2nd video download to complete the Experiment Tally Sheet below. Her available budget was $19.00.   Downloads of mu (score) from 1 to 100 Price of each $3.00  Money spent on  Downloads of  mu (score) from 1 to 100 Price of each $3.00 Money spent on  Total Money  Total Budget  music mu mu/$ music videos mu mu/$ videos Spent Remaining 1st ? ?…