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Arlo is very health conscious and consumes only two goods, rice cakes and quinoa. His utility function is u( r, q) = r'q. where r
Arlo is very health conscious and consumes only two goods, rice cakes and quinoa. His utility function is u( r, q) = r'q. where r is the number of packs of rice cakes he consumes and q is ounces of quinoa. The price of a pack of rice cakes is $4, and the price of an ounce of quinoa is $8. Arlo has $720 to spend this week on these two goods. Suppose that the price of quinoa suddenly falls to $4,The income effect of the fall in the price of quinoa, on Arlo's demand for quinoa, is equivalent to an increase in his income of $ per week. Does the income effect make him consume more quinoa or less? How much more or less? 10 ounces of quinoa Part 6 (4 points) See Hint Finally, let's think about the effect of the change in the price of quinoa on Arlo's demand for rice cakes. Does the substitution effect of the fall in the price of quinoa make Arlo consume more or fewer rice cakes? How many more or fewer? packs of rice cakes Does the income effect of the fall in the price of quinoa make Arlo consume more or fewer rice cakes? What is the total effect of the change in the price of quinoa on the demand for rice cakes
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