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Intermediate Microeconomics question 5 Mr. Kimeu has a Nyama choma consumption demand function which is given...

Intermediate Microeconomics question 5

Mr. Kimeu has a Nyama choma consumption demand function which is given as
Q = 20 + M/1-P where Q is the quantity of Nyama choma in grams per week, P is the price per gram per week and M is his income.

His income is Ksh.150. If the price of Nyama choma per gram changes from 3 to Ksh.5.


Calculate Mr. Kimeu’s

  • Total price effect,
  • Substitution effect,
  • Income effect of the price change.
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Answer #1

When price increases from 3 to 5 quantity decreases from 55 to 37.5

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