Consider 2 goods, meat (M) and bread (B), that are traded in the market at the price pM and pB respective?
plzzz helppp meeeeee...i really dont know how to answer it
Update:Consider 2 goods, meat (M) and bread (B), that are traded in the market at the price pM and pB respectively. Assume that the price of bread increases from a low level pB 0 to a higher level pB 1 .
Draw a fully labeled diagram where the quantity of bread is shown on the horizontal axis
and the quantity of meat is shown on the vertical axis.
Show the decomposition of the total effect of the price change into a substitution effect
and an income effect assuming that bread is considered a Giffen good.
Explain the economic logic behind your drawing in no more than 500 words.
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This question is not complete. Now, you have two markets, each with own demand and supply, but no question to answer :)
OK, here you are:
http://rapidshare.com/files/317087677/breadforlola...
(I hope you will see it)
I've used decomposition according Hicks
X0...equilibrium before chanege
X1...eql after change
BL... budget line
IC.. indifference curve
blue line helps by Hicks's decomposition
arrows show substitution, income and total effect
Just note, if price of Giffen good increase, the total demanded amount increase too! So, B1>B0
I'm not sure what you are asking? I think I should be able to help but the question isn't complete. What are you being asked to consider about them?