A maximizing consumer with preferences u = x^(1/2)+ y^(1/2) pays pY= 4 and pX= 4 and spends 24 dollars on these goods. Next month the price of good y will fall to pY= 2. Provide an Indifference Curve Diagram to illustrate and quantify her optimal choices as Bundles A and B. Quantify all intercepts.

A maximizing consumer with preferences u = x^(1/2)+ y^(1/2) pays pY= 4 and pX= 4 and spends 24 dollars on these goods. Next month the price of good y will fall to pY= 2. Provide an Indifference Curve Diagram to illustrate and quantify her optimal choices as Bundles A and B. Quantify all intercepts.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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