Suppose that Two goods are perfect complements.
a. if the price of one good changes, what part of the change in demand is due to the substitution effect, and what part is due to the income effect?
This is a homework problem for my economics class.
The possible answer choices were:
All substitution effect
All income effect
part substitution and part income (doesn't necessarily have to be half)
half income effect, half substitution efffect
> I thought it would be all income effect because being complements, the substitution effect would be implausible in this situation
a. if the price of one good changes, what part of the change in demand is due to the substitution effect, and what part is due to the income effect?
This is a homework problem for my economics class.
The possible answer choices were:
All substitution effect
All income effect
part substitution and part income (doesn't necessarily have to be half)
half income effect, half substitution efffect
> I thought it would be all income effect because being complements, the substitution effect would be implausible in this situation