Brayden receives some utility from consuming a frozen dinner, an inferior good. however, he would much rather purchase fresh food, a normal good, if he could afford it. since a frozen dinner is an inferior good, how would an increase in its price affect the quantity brayden demands? the substitution effect causes brayden's quantity demanded of frozen dinners to decrease. the income effect causes brayden's quantity demanded of frozen dinners to increase since his purchasing power has changed. because a frozen dinner is an inferior good but not a giffen good, the substitution effect is stronger than income effect . this causes quantity demanded for a frozen dinner to decrease when the price increases. in this example, how do the substitution effect and income effect interact with each other? they work in the same direction. there is no way to know. they do not interact with each other. they work in opposite directions.

Saeed needs money to purchase tools, basic office supplies, parts to refurbish equipment, accounting software, and legal fees. believing saeed's business will be a success, an investor invests $5,000 to saeed open his business. in return, saeed agrees to repay the investor the $5,000 plus 17 percent of the profits of the business. calculate the return on investment for the investor if saeed's business makes $7,000 in profit as a total return of the business in its first year.

Suppose that two firms produce differentiated products and compete in prices. as in class, the two firms are located at two ends of a line one mile apart. consumers are evenly distributed along the line. the firms have identical marginal cost, $60. firm b produces a product with value $110 to consumers.firm a (located at 0 on the unit line) produces a higher quality product with value $120 to consumers. the cost of travel are directly related to the distance a consumer travels to purchase a good. if a consumerhas to travel a mile to purchase a good, the incur a cost of $20. if they have to travel x fraction of a mile, they incur a cost of $20x. (a) write down the expressions for how much a consumer at location d would value the products sold by firms a and b, if they set prices p_{a} and p_{b} ? (b) based on your expressions in (a), how much will be demanded from each firm if prices p_{a} and p_{b} are set? (c) what are the nash equilibrium prices?

What impact might an economic downturn have on a borrower’s fixed-rate mortgage? a. it might cause a borrower’s payments to go up. b. it might cause a borrower’s payments to go down. c. it has no impact because a fixed-rate mortgage cannot change. d. it has no impact because the economy does not affect interest rates.