For M > P₂, the Demand Functions for Goods 1

question 42

Multiple Choice

For m > p₂, the demand functions for goods 1 and 2 are given by the equations, x₁ = m/p₂ - 1 and x₂ = p₁/p₂, where m is income and p₁ and p₂ are prices.Let the horizontal axis represent the quantity of good 1.Let p₁ = 1 and p₂ = 2.Then for m > 2, the income offer curve is

• A)a vertical line.
• B)a horizontal line.
• C)a straight line with slope 2.
• D)a straight line with a slope of 1/2.
• E)None of the above.

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