1. Consider a consumer whose utility depends on q1 and all other goods. It is known that q1 is an inferior good for this consumer. Graphically illustrate the consumer at the original utility maximizing position. The consumer is offered two options. Option one: the consumer is given q1A amount of good q1 (the consumer does not pay for this amount of q1). Option two: the consumer receives the cash value of the amount of g1A. Would the consumer prefer option one, option two, or be indifferent between them? Explain and add relevant information to the graph (e.g. the graph should illustrate the outcome of each option). Your explanation should be in the context of the necessary conditions. Saying one option is on a higher, lower, or the same indifference curve is not sufficient.

1. Consider a consumer whose utility depends on q1 and all other goods. It is known that q1 is an inferior good for this consumer. Graphically illustrate the consumer at the original utility maximizing position. The consumer is offered two options. Option one: the consumer is given q1A amount of good q1 (the consumer does not pay for this amount of q1). Option two: the consumer receives the cash value of the amount of g1A. Would the consumer prefer option one, option two, or be indifferent between them? Explain and add relevant information to the graph (e.g. the graph should illustrate the outcome of each option). Your explanation should be in the context of the necessary conditions. Saying one option is on a higher, lower, or the same indifference curve is not sufficient.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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