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Goods 1 and 2 are perfect complements for Kane. He always consumes these two goods in the ratio of 2 units of good 2 for
Goods 1 and 2 are perfect complements for Kane. He always consumes these two goods in the ratio of 2 units of good 2 for every unit of good 1. The price of good 1 is $1.00, and the price of good 2 is $4.00. Kane has $234.00 to spend. Give your answers to two decimal places.
Part 1 - The substitution effect of a change in the price of good 2 from $4.00 to $6.00 will reduce the demand for good 2 by units.
Part 2 - The income effect of the increase in the price of good 2 from $4.00 to $6.00 will cause demand for good 2 to fall by units.
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