Author Question: If an individual buys only two goods and these must be used in a fixed relationship with one another ... (Read 12 times)

nenivikky · **on:** Jul 1, 2018

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g., coffee and cream for a coffee drinker who never varies the amount of cream used in each cup), then
a. there is no substitution effect from a change in the price of coffee.
b. there is no income effect from a change in the price of coffee.
c. Giffen's Paradox must occur if both coffee and cream are inferior goods.
d. an increase in income will not affect cream purchases.

Question 2

The advantages of the M-Form of firm organization is
a. divisions can respond more easily to change
b. it is easier to maintain customer relationships
c. there is less coordination across the firm's divisions
d. all of the above