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Author Question: Assume a distant tribe only harvests breadfruit and its entire livelihood depends on it. If the ... (Read 147 times)

CQXA

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on: Jun 29, 2018
Assume a distant tribe only harvests breadfruit and its entire livelihood depends on it. If the price of breadfruit were to rise suddenly how might it be possible that this tribe would actually consume more breadfruit?
 
  What will be an ideal response?

Question 2

A monopoly that can perfectly price discriminate creates no deadweight loss.
 
  Indicate whether the statement is true or false


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orangecrush

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The substitution effect would cause a decline in the consumption of bread fruit ceteris paribus. However, because breadfruit is the principle means by which the tribe earns its income there is also an income effect. If breadfruit is a normal good and the income effect is strong enough it can outweigh the substitution effect.

Answer to Question 2

TRUE


CQXA

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

olderstudent

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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