*5. Suppose that Sonya faces an increase in the price of pasta, as depicted below, moving her...

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*5. Suppose that Sonya faces an increase in the price of pasta, as depicted below, moving her from an optimum bundle of rice and pasta at A to an optimal bundle at B.

a. Trace a copy of this diagram. Graphically depict the substitution and income effect.

b. Which effect is strongest? How can you tell?

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Microeconomics

ISBN: 9780716759751

1st Edition

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

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