Asked by
Katherine Gonzalez
on Oct 27, 2024
Verified
Pooh spends all of his income on honey and maple syrup.Because he views honey and maple syrup as perfect substitutes,he is willing to substitute honey for maple syrup at the constant rate of 1 teaspoon of honey to 2 teaspoons of maple syrup.If the price of honey in terms of maple syrup is 2.2,Pooh's optimal consumption bundle will consist entirely of maple syrup.
Perfect Substitutes
Goods for which the indifference curves are straight lines; the marginal rate of substitution of one good in place of another good is constant, regardless of how much of each an individual consumes.
- Analyze scenarios illustrating the principle of substitution in the context of perfect substitutes and ordinary goods.
- Analyze the repercussions of price adjustments on the preferred combination of items for consumption.
Verified Answer
RG
Learning Objectives
- Analyze scenarios illustrating the principle of substitution in the context of perfect substitutes and ordinary goods.
- Analyze the repercussions of price adjustments on the preferred combination of items for consumption.
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