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1.Suppose that, from an initial consumer equilibrium position, the price of good X rises while the price of good Y remains the same. Using indifference
1.Suppose that, from an initial consumer equilibrium position, the price of good X rises while the price of good Y remains the same. Using indifference curve analysis, explain how and why the consumer's relative consumption of the two goods will change. Now suppose that the price of labour falls. Explain how producers would respond, using the isocost/isoquant framework. What would happen to the capital/labour ratio?
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