Unlike the Classical economists, Keynes believed that the economy could get stuck in the short run for a significant period of time because:
ECO401 gdb 1 Solution and Discussion
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Hadii Hadia last edited by
Total Marks 5
Starting Date Friday, May 28, 2021
Closing Date Thursday, June 03, 2021
Question Title Consumer Behavior: Consumption side analysis
In year 2020, Pakistan faced the deadliest of the natural calamities in form of locust attack. Due to this the agriculture sector faced a loss of almost 353 billion rupees. Both the winter and summer crops were damaged partially, and after many years the Government of Pakistan decided to import the food items, to maintain the market price. In this background let’s assume, two groups, A and B are living in the country, with certain rational behavior towards the commodity prices of essential food items like wheat. Both groups have different opinion about wheat. People from group A consider wheat as a staple food, while people from group B consider it as a normal good. During the last month due to the fall in the commodity prices, it was observed, that people from group A, decreased their demand for wheat, where as people from group B increased their demand for wheat.
Which type of product is wheat for people from group A and people from group B?
What will be the income effect for the people from group A?