Consider a Consumer Who Consumes Only and

question 2

Essay

Consider a consumer who consumes only and .The price of falls.
a.On a graph with on the horizontal and on the vertical axis, illustrate the change in this consumer's budget constraint assuming exogenous income I.
b.Illustrate income and substitution effects for assuming that both goods are normal.
c.Can you tell whether the cross-price demand curve for is upward or downward sloping?
d.Suppose is leisure hours and is a composite consumption good.Consider an increase in the wage assuming a fixed endowment of leisure (and no exogenous source of income).How is your graph similar and how is it different from what you graphed in (a) through (c)?
e.Is the leisure-demand curve a cross-price demand curve? Why or why not?

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Definitions:

Extensive Distribution

A distribution strategy that places a product in as many outlets as possible.

Distribution Density

The extent to which a product's availability is spread across a geographical area or among a number of retailers.

Intensive Distribution

A distribution strategy where a company sells its products in as many outlets as possible to maximize coverage and sales potential.

Density of Distribution

The extent or thoroughness of a product's availability across different outlets and locations.