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Suppose that Ella has a demand function for milk of the form:

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(i) Suppose that Ella has a demand function for milk of the form: X1=10+m/(10P1);where her income is originally $120 per week and the price of milk (P1) is $3 per litre. 1p;a. What is Ella?s demand for milk (in litres)?;Suppose that the price of milk now falls to $2 per litre.;b. Calculate the substitution effect of the price change.;c. Calculate the income effect of the price change.;d. What is the overall effect on Ella?s demand for milk?

 

Paper#28030 | Written in 18-Jul-2015

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