DQ Jane spends all her income on hot dogs and caviar

ECN 220 Grand Canyon Week 3 Discussion 1

Jane spends all her income on hot dogs and caviar. Her demand curve for caviar is inelastic at all prices for caviar. Unfortunately, the accident at Chernobyl has caused the supply of caviar to fall and the price to rise. What has happened to Jane’s consumption of hot dogs? Explain. (Note: You should assume that the accident at Chernobyl had no effect on the price of hot dogs or Jane’s preference for caviar.)