Author Question: Refer to Figure 4-6. What area represents the deadweight loss at the equilibrium price of P1? A) ... (Read 96 times)

Capo

  • Hero Member
  • *****
  • Posts: 545
Refer to Figure 4-6. What area represents the deadweight loss at the equilibrium price of P1?
 
  A) G + H B) C + E
  C) C + E + H D) There is no deadweight loss at the price of P1.

Question 2

Into what two effects can we divide the effect of a price change?
 
  What will be an ideal response?



parshano

  • Sr. Member
  • ****
  • Posts: 333
Answer to Question 1

D

Answer to Question 2

A price change can be divided into a substitution effect and an income effect. The substitution effect is the effect of a change in price on the quantity bought when the consumer remains indifferent between the original situation and the new situation. The income effect is the effect of a change in income sufficient to get the consumer to the highest indifference curve that is affordable on the new budget line reflecting the price change.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Though the United States has largely rejected the metric system, it is used for currency, as in 100 pennies = 1 dollar. Previously, the British currency system was used, with measurements such as 12 pence to the shilling, and 20 shillings to the pound.

Did you know?

Many people have small pouches in their colons that bulge outward through weak spots. Each pouch is called a diverticulum. About 10% of Americans older than age 40 years have diverticulosis, which, when the pouches become infected or inflamed, is called diverticulitis. The main cause of diverticular disease is a low-fiber diet.

Did you know?

GI conditions that will keep you out of the U.S. armed services include ulcers, varices, fistulas, esophagitis, gastritis, congenital abnormalities, inflammatory bowel disease, enteritis, colitis, proctitis, duodenal diverticula, malabsorption syndromes, hepatitis, cirrhosis, cysts, abscesses, pancreatitis, polyps, certain hemorrhoids, splenomegaly, hernias, recent abdominal surgery, GI bypass or stomach stapling, and artificial GI openings.

Did you know?

Atropine, along with scopolamine and hyoscyamine, is found in the Datura stramonium plant, which gives hallucinogenic effects and is also known as locoweed.

Did you know?

Famous people who died from poisoning or drug overdose include, Adolf Hitler, Socrates, Juan Ponce de Leon, Marilyn Monroe, Judy Garland, and John Belushi.

For a complete list of videos, visit our video library