Suppose that Jeanna's income rises. If tomatoes are a normal ...

[silviawilliams41]

Suppose that Jeanna's income rises. If tomatoes are a normal good, what will happen to the quantity of tomatoes purchased by Jeanna? Is this an income effect, a substitution effect, or both? Explain.
 
  What will be an ideal response?

Question 2

Refer to Table 2-5. Assume Nadia's Neckware only produces ascots and bowties. A combination of 8 ascots and 18 bowties would appear
 
  A) along Nadia's production possibilities frontier.
  B) inside Nadia's production possibilities frontier.
  C) outside Nadia's production possibilities frontier.
  D) at the horizontal intercept of Nadia's production possibilities frontier.

[adammoses97]

Answer to Question 1

Jeanna will purchase more tomatoes if her income rises because tomatoes are a normal good. This is an income effect. Her income has increased, so she is better off. There is no substitution effect in this case because there is no change in relative prices.

Answer to Question 2

A