00:01
So, here in a question we have to discuss about this substitution effect, substitution effect.
00:08
So, first of all let's understand what is this effect.
00:11
So, this effect refers to change in consumption pattern, change in consumption pattern that occur when price of one good changes.
00:37
So, assuming the consumer satisfaction remain the constant.
00:42
So, in this case the given scenario if the price of breakfast sandwich fall, if price of breakfast sandwich fall it become relatively cheaper compared to the scones and consumer may adjust their consumption to maximize their utility within the budget constraint.
01:10
So, now from the information total expenditure will be here total expenditure is given by the equation that is p scone multiply by q scone plus p s sandwich multiply by q sandwich.
01:41
So, here this is 2 multiply by 4 plus 4 multiply by 2 which is 8 plus 8, 8 16.
01:54
So, since the total expenditure is less than the weekly budget, total expenditure is less than the weekly budget which is 16 is less than 20.
02:04
So, there is a room to reallocate spending, room to reallocate spending to maximize utility within the budget...