Exponential equation discussion

timer Asked: Mar 21st, 2014

Question description

Mr. Omondi demand function for rice is given by

            X = 15 + M (25P) -1

Where X = amount of rice demanded, M = income of the consumer, P = price of rice.

Originally, the income of Mr. Hassan is 19,200 per month and the price of rice is kshs. 200/kg. If the price increases to kshs 240/kg, calculate to total effect (TE), substitution effect (SE) and Income effect (IE) emanating from this change in price. Is rice an inferior or a normal good

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