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Mark likes to have 1.5 portions of fries with each burger he eats. He does not eat burgers without fries nor fries without burgers. Let
Mark likes to have 1.5 portions of fries with each burger he eats. He does not eat burgers without fries nor fries without burgers. Let X be the quantity of portions of fries he consumes and Y the quantity of burgers. For simplicity assume that he can consume parts of portions of fries and parts of burgers. Suppose he has $12 to spend on fries and burgers. The price of a portion of fries is $1 and the price of a burger is $2.50. Now suppose that there is a shortage of beef and the price of burgers increases to $3.50. What is the price effect (PE), the substitution effect (SE) and the income effect (IE) on fries? Question 9 options: PE=-1.25; SE=0; IE=-1.25 PE=-0.9; SE=-0.9, IE=0 PE=-1.25; SE=-1.25; IE=0 PE=-0.9; SE=0, IE=-0.9
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