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In: Economics

Consumers choose between coffee and tea. Tea is known to be healthier than coffee but coffee...

Consumers choose between coffee and tea. Tea is known to be healthier than coffee but coffee has more caffeine. Consumers have decreasing marginal utility for both caffeine and health. However, recent scientific results find that coffee is much healthier for you than previously believed. Answer the following questions:

1. Based on economic theory, show graphically (budget constraint and indifference curves) and explain in 2-3 sentences how this scientific evidence will change a consumer’s choice decision.

2. Using the multiattribute model, show graphically and explain in 2-3 sentences how the scientific evidence will change a consumer’s choice decision.

3. Show graphically and explain in 2-3 sentences how this discovery impacts an individual’s demand curve for coffee.

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Expert Solution

Explanation:-

Please find attached the image which contains solution for both the parts (1) (2) and (3),

If you have any dought about thus answer dont give dislike ,tell us your dought in the comment then i can explain, Please rate me by giving me a like or thumb because it motivates me to do more work,Thank you.

Rahul Sunny answered 2 years ago
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