AGB 524/624 Spring 2023, Quiz # 1 I. (9 points) Qbeef BZ QPork The above diagram shows the effects of change in price of pork (X) on the quantity demanded for pork and beef (Y) as consumers make rational choices of consumption bundles that include pork and beef. Bi represents budget line before the decrease in price of pork. I, is the original indifference curve. Price of pork decreases which produces a new budget line, B2, which is tangent to the new indifference curve, I2. Complete the following table by selecting right answer when relative price of X (pork) decreases. Type of A. Due to Substitution B. Income Effect (select the C. Total Effect (select the Good Effect (select the right right answer) right answer) answer 1) Normal a. Consumption of X . Consumption of X decreases a. Consumption of X decreases decreases b. Consumption of X Increases b. Consumption of X Increases b. Consumption of X c. Consumption of X remains . Consumption of X remains Increases the same the same c. Consumption of X d. None of the above d. None of the above remains the same d. None of the above 2) Inferior a. Consumption of X a. Consumption of X decreases a. Consumption of X decreases decreases . Consumption of X Increases b. Consumption of X Increases . Consumption of X . Consumption of X remains . Consumption of X remains Increases the same the same Consumption of X d. None of the above d. None of the above remains the same d. None of the abov 3) Giffen* a. Consumption of X a. Consumption of X decreases Consumption of X decreases decreases b. Consumption of X Increases b. Consumption of X Increases b. Consumption of X . Consumption of X remains . Consumption of X remains Increases the same the same c. Consumption of X 1. None of the above d. None of the above remains the same d. None of the above *theory developed by Sir Robert Giffen, a famous English Economist.II. Using the following information calculate a) Laspeyres Price Index value for 2014 b) Passche Price Index value for 2013. Assume that the base year is 2011 (4 points). Year Price of beef (P1) Quantity of beef Price of Pork (P2) Quantity pf Pork per lb in $ Consumed (X1 ) lbs per 1b in $ Consumed (X2) 1bs 2011 4 3 2012 2013 6 2014