(c) When the price of CCC increases from $1 to $8, calculate Maya’s substitution effect and income effect.(d) According to your calculation in part (c), is CCC a normal good or an inferior good? Explain. Is CCC an ordinary good or a Giffen good? Explain. (b) When the price of CCC is $8, what is Maya's optimal choice of donuts and CCC? Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC).Her utility function is given by u(x, y) = √√8x + 5 + 2y, where x denotes her consumption of donuts and y denotes herconsumption of CCC. Her budget is $10/day. The price of a donut is $1.(a) When the price of CCC is $1, what is Maya's optimal choice of donuts and CCC?

The substitution effect describes the change in consumption patterns that occurs when consumers…

Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC). Her utility function is given by u(x, y) = √8x + 5 + 2y, where x denotes her consumption of donuts and y denotes her consumption of CCC. Her budget is $10/day. The price of a donut is $1.

Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC). Her utility function is given by u(x, y) = √8x + 5 + 2y, where x denotes her consumption of donuts and y denotes her consumption of CCC. Her budget is $10/day. The price of a donut is $1.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 1WNG

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Question

(d) According to your calculation in part (c), is CCC a normal good or an inferior good? Explain. Is CCC an ordinary good or a Giffen good? Explain.

(b) When the price of CCC is $8, what is Maya's optimal choice of donuts and CCC?

Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC).
Her utility function is given by u(x, y) = √√8x + 5 + 2y, where x denotes her consumption of donuts and y denotes her
consumption of CCC. Her budget is $10/day. The price of a donut is $1.
(a) When the price of CCC is $1, what is Maya's optimal choice of donuts and CCC?

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