Question
Consider Amanda and her demand for cheese. When the price of cheese is $8.00 a pound, Amanda demands10pounds per month. If the price of cheese
Consider Amanda and her demand for cheese. When the price of cheese is $8.00 a pound, Amanda demands10pounds per month. If the price of cheese increases to $10.00 a pound, Amanda's demand falls to5.00pounds.
Now suppose that Amanda wins a prize at work that increases her income to $100.00, so if she would like, she can now afford the original amount of cheese even though prices are higher. Instead, she decides to buy9.00pounds of cheese.
What is the total change in Amanda's demand for cheese when the price rises from $8.00 to $10.00 a pound? a decreaseof ______ pounds
The total change in demand can be broken down into two parts: the income effect and the substitution effect. In this case, the income effect accounts for______pounds ______of the total decrease, and the substitution effect accounts for the otherpounds.
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