Re: Dse 2010 Q44

Posted by Ridhika on Jun 26, 2014; 7:39am
URL: http://discussion-forum.276.s1.nabble.com/Dse-2010-Q44-tp7592978p7593632.html


Can someone please explain question 37 from this paper? The buy one get one scheme question..?

[Link to paper - http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/option-a-2010.pdf ]

Shouldnt the correct answer be x*/2 < xd < x* and yd> y*

I say this because preferences are well behaved. Therefore substitution effect will make him want more of x* than before ( and he gets 2xd in this case) and income  effect will induce him to desire more of both goods.