Use the budget constraint PxX+PYY=M, thinking of good X as a food item and good Y...

Use the budget constraint PxX+PYY=M, thinking of good X as a food item and good Y as other goods. Present an analysis where an increase in price of the food item causes the consumer to by less food, demonstrating the “law of demand.” Then, present a second analysis where an increase in the price of the food item causes the consumer to buy more of the food item, which is the Giffen Good case. Finally, identify two food items, one which you think fits the first case and one which you think fits the second case.

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Rahul Sunny answered 1 year ago

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