Question

Quinn's income to spend each month on two normal goods, bowling or eating out, is $100. It costs $10 to bowl for the night, and it costs $20 for Quinn to eat at a restaurant. Quinn currently consumes four nights of bowling and three meals at a restaurant. If the price of bowling increased to $15, the income effect would predict:

Answer 1

Answer:

In this case the income effect would predict:

Quinn would consume less meals and less bowling.

Explanation:

Quinn would do this because:

• As the bowling has increased from 10$ to 15$. Also, Quinn is consuming and four nights of bowling and three meals.

Total Income = 100$

Suppose if Quinn has decreased the number of bowling from 4 to 3 then

2 bowling nights will cost = 15 x 3

2 bowling nights will cost = 45$

3 meals will cost  = 20 x 3

3 meals will cost  = 60 $

Total = 45 + 60 = 105 $

That is more than the income. So, it is concluded that Quinn has to less both the bowling and meals at restaurant.