Assume two consumers A and B with identical preferences over two goods X and Y as shown by the indifference curves I and I but with unequal budget constraints AyAx and ByBx. Points E and EB show their utility maximization equilibrium positions. Assume that the manufacturer of X drops the price of X to half its size to customers buying more than the volume L shown in the graph. Identify how the price discount affects, if at all, the utility maximization purchases of A and B Hint: after level L is reached, the angle by which AyAx and ByBx cut the horizontal axis is half of the size of the

Assume two consumers A and B with identical preferences over two goods X and Y as shown by the indifference curves I and I but with unequal budget constraints AyAx and ByBx. Points E and EB show their utility maximization equilibrium positions. Assume that the manufacturer of X drops the price of X to half its size to customers buying more than the volume L shown in the graph. Identify how the price discount affects, if at all, the utility maximization purchases of A and B Hint: after level L is reached, the angle by which AyAx and ByBx cut the horizontal axis is half of the size of the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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