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Consider the QuantityQuality model by Gary Becker (1960). The following graph shows the effects of an increase in household income (that shifts the budget constraint
Consider the \"QuantityQuality\" model by Gary Becker (1960). The following graph shows the effects of an increase in household income (that shifts the budget constraint from Cg to Cl) on parental choices of number of children (N) and quality per child (Q), 1.0. the quantity and quality of children. IQ Qualily Pan-Child Number of Children Which of the following statements regarding the income expan sion path (indicated in the gure by the arrow originating from zero and pointing northeast) is true? 6' Along the income expansion path, it holds that en = cg? where ran and er, denote respectively the income elasticity of the demand for N and Q. b. r - .- . . W hen movmg downwards along a budget constraint (Le. in southeast direction), 12: increases. c' Along the linear income expansion path, the marginal rate of substitution (MRS) between N and Q is constant but the ratio of their prices increases when quality per child increases. d\" Along the income expansion path (for income>0), changes in income affect N, Q and g
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