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CHAPTER 4 Suppose the only goods you buy are wine and roses. a. Between Monday and Tuesday, the price of wine goes up (while your 7. income remains fixed). Draw a diagram, with wine on the horizontal axis and roses on the vertical, to illustrate how your budget line moves. Illustrate your optimum points on the two budget lines, labeling Mondays optimum M and Tuesdays optimum T b. On Wednesday, the price of wine returns to its Monday level, but at the same moment your income falls by just enough so that you are just as happy on Wednesday as on Tuesday. Draw Wednesdays optimum point and label it W In each of parts c, d, and e determine whether the statement is (1) true always, (2) false always, (3) true if wine is an inferior good, but otherwise false, (4) false if wine is an inferior good, but otherwise true, (5) true if wine is a Gifen good, but otherwise false, or (6) false if wine is a Giffen good but otherwise true. c. M is to the left of 1T d. T is to the left of W

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