Sierrah spends her monthly entertainment budget on books and movies. Sierrahs initial utility-maximizing combination of books and
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Sierrah spends her monthly entertainment budget on books and movies. Sierrah’s initial utility-maximizing combination of books and movies is five movies and two books a month. Assume the price of books falls. Sierrah’s new utility-maximizing combination of books and movies is five movies and four books. Given this information, can we say whether movies are a normal good?
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Yes We know that the substitution effect will lead Sierrah to substitute away from movies an...View the full answer
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