Asked by Nickey
Ann lives in Princeton and commutes by train each day to her job in New York City (20 round trips per month). When the prices of a round trip goes up from $10 to $20, she responds by consuming, exactly the same number of trips as before, while spending $200 per month less on restaurant meals.
a.Does the fact that her quantity of train travel is completely unresponsive to the price increase imply that Ann is not a rational consumer?
b.Explain why an increase in train travel might affect the amount she spends on restaurant meals.
a.Does the fact that her quantity of train travel is completely unresponsive to the price increase imply that Ann is not a rational consumer?
b.Explain why an increase in train travel might affect the amount she spends on restaurant meals.
Answers
Answered by
economyst
Take a shot. What do you think. Hint for a) think about opportunity cost. Hint for b) think about budget constraints.
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