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Jake spends his money on only two things: t-shirts and donuts. Suppose the price of donuts falls. Naturally, Jake buys more donuts. He buys fewer
Jake spends his money on only two things: t-shirts and donuts. Suppose the price of donuts falls. Naturally, Jake buys more donuts. He buys fewer t-shirts. This means that for Jake, the (Click to select) dominates. Becky spends her money on only two things: hiking boots and paintbrushes. For her, the income effect dominates. When the price of paintbrushes rises, Becky will naturally buy fewer paintbrushes. And she will buy (Click to select) hiking boots
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