Substitution and Income Effects Paper
Managers are very interested in how a consumer makes
a choice among alternatives. In this exercise, we ask you to
consider the amount of money you
spend purchasing gasoline to operate your automobile for
a month and any alternatives available to you assuming your
net income available to make those purchases. Also assume gasoline
prices for your auto rose 100% during one difficult summer as our
time period for the purpose of discussion. Explain, then, the
following effects in terms of the income effect, or the
substitution effect, or both effects:
You drove less and purchased less gasoline.
You ate out less often.
You spent less to maintain your automobile.
You took public transportation more often.
You bought a bicycle.
You did not take a vacation away from home.
You bought fewer clothes and made due with more around the
Construct a four-to-five page APA format paper based on the
above issues. Use two external sources and demonstrate your
understanding of the concepts by providing a graph of each effect
as a figure in your paper.