Use the information below to answer the following questions.

Fact 9.3.3

Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and coffee are ordinary goods. Now the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup.

Refer to Fact 9.3.3. When the price of a muffin and the price of a cup of coffee change,

Question

Use the information below to answer the following questions. 
 
 Fact 9.3.3 
 
 Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and coffee are ordinary goods. Now the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup.

Refer to Fact 9.3.3. When the price of a muffin and the price of a cup of coffee change,

Accepted Answer

there is both a substitution effect and an income effect.

Answer

there is neither an income effect nor a substitution effect.

Answer

Jim remains on the same indifference curve.

Answer

there is an income effect but no substitution effect.

Answer

there is a substitution effect but no income effect.

Crowdly

Use the information below to answer the following questions. Fact 9.3.3 ...

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