Topic: Market demand.

It assumes that consumers only buy two goods, food (F) and housing (H), and that they buy them in fixed parts; from unit to unit.

a) In this case, what would the compensated demand for food (F) look like? What is the price elasticity along this curve?

b) What is the income elasticity for food demand (F)?

c) Assume that a food (F) costs half of what a house costs (H), what part of the income will be spent on food (F)?

d) Using the information in questions (a) - (c), what is the price elasticity of total food demand (including income and substitution effect)? Use a numerical example..