ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose that a consumer has $200 to spend on two goods: beer and pretzels. The price of beer is
$6.00 and the price of pretzels is $3.00. The price of beer decreases to $3.00. Because beer is
now cheaper relative to pretzels, the consumer will want to consumer more beer and fewer
pretzels. This is an example of which of the following?
The income effect
A giffen good
The substitution effect
Bowed indifference curve
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Transcribed Image Text:Suppose that a consumer has $200 to spend on two goods: beer and pretzels. The price of beer is $6.00 and the price of pretzels is $3.00. The price of beer decreases to $3.00. Because beer is now cheaper relative to pretzels, the consumer will want to consumer more beer and fewer pretzels. This is an example of which of the following? The income effect A giffen good The substitution effect Bowed indifference curve
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