Jennifer divides her income between coffee and croissants. An early frost in Brazil causes a large increase

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Jennifer divides her income between coffee and croissants. An early frost in Brazil causes a large increase in the price of coffee in Australia.

a Show the effect of the frost on Jennifer’s budget constraint.

b Show the effect of the frost on Jennifer’s optimum consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

c Show the effect of the frost on Jennifer’s optimum consumption bundle assuming that the income effect outweighs the substitution effect for croissants.

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Principles Of Microeconomics [Australia And New Zealand Edition]

ISBN: 9781337408066

6th Edition

Authors: Joshua Gans, Stephen King, Martin Byford, N. Gregory Mankiw

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