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Author Question: Alison consumes only tea and cookies and consumes them only in equal proportions. What is Alison's ... (Read 103 times)

chandani

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on: Jul 1, 2018
Alison consumes only tea and cookies and consumes them only in equal proportions. What is Alison's income elasticity of demand for tea?
 
  What will be an ideal response?

Question 2

All Nash equilibria consist of Dominant Strategies
 
  Indicate whether the statement is true or false


chjcharjto14

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Reply #1 on: Jul 1, 2018
Answer to Question 1

First, derive the demand equation using the budget constraint and the fact that T = C. Then
T = I/(pt + pc)
Using calculus,
T/I = -I/(pt + pc)2
The income elasticity is:
T = -I/(pt + pc)2  (I/T) = -1

Answer to Question 2

False. Games with multiple Nash equilibria are not DS.


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