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Hi, I have a question for which the answer is provided but I don't know how it is derived, could you help to explain it
Hi, I have a question for which the answer is provided but I don't know how it is derived, could you help to explain it step by step please?
Income effect of the price change
- Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $300 and if the price of good 2 changes from $5 to $6, while the price of good 1 stays at $1, then the income effect of the price change: (Answer = accounts for the entire change in demand).
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