Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer these two questions:) Sara has a demand function for cake q = 0.02m - 2p, where m is income and p is price.

Please answer these two questions:)

image text in transcribedimage text in transcribed
Sara has a demand function for cake q = 0.02m - 2p, where m is income and p is price. Sara's income is $6,500 and she initially had to pay a price of $50 per box of cake. The price of cake rose to $60. The substitution effect of the price change Select one: O a. reduced her demand by 14. O b. reduced her demand by 20. O c. increased her demand by 20. O d. reduced her demand by 26.If Sandra (whose utility function is min(x, y), where x is her consumption of cupcake and y is money left for other stuff) had an income of $12 and was paying a price of $4 for a cupcake, then if the price of cupcake went up to $6, the equivalent variation of the price change would be Select one: O a. $4.80. O b. $9.60. O c. $1.71. O d. $3.43

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Rise And Fall Of Neoliberal Capitalism

Authors: David M Kotz

1st Edition

0674725654, 9780674725652

More Books

Students also viewed these Economics questions