When the price of a good changes, the income effect can be found by comparing the equilibrium quantities purchased
A) on the old budget line and the new budget line.
B) on the original indifference curve when faced with the original prices and when faced with the new prices.
C) on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line.
D) on the new indifference curve.
C
You might also like to view...
George is considering investing in a frozen yogurt store. If the store does well he will make $20,0000, but if the store does poorly he will make only $10,000. There is a 50 percent chance of each outcome
His utility of wealth schedule is in the above table. The expected utility of this investment is A) 115. B) 140. C) 165. D) 180.
If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
a. it increases revenue more than costs or reduces costs more than revenue b. it decreases some costs more than it increases others (assuming revenues remain constant) c. it increases some revenues more than it decreases others (assuming costs remain constant) d. all of the above e. b and c only