Question

ce and bags ke rises, will il the demand cm or False. Use a graph in your answer. income on two goods, diet coke and 2. Suppose Barbara spends her entire income on tic. If the price of diet coke ris Her demand curve for diet coke is inelastic. she consume more or less bagels? Show graphica carry 1000 passengers a day wh day who

Answer 1

Though the demand is inelastic still the consumption of coke would increase and this is shown by the graph above via substitution and income effects the combination of these two shows the increase in consumption of coke.

Bagels A B C A B B-C (substitution effect) (income effect)