Consider a consumer with an income of M = 200 in an economy with 3 goods. Let the prices be p1 = 4, p2 = 2 and p3= 21, respectively. a. Define the budget set facing the consumer. b. Find two bundles, (x1, x2, x3) and (y1, y2, y3) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? c. Suppose the price of good 3 decreases to p3= 15. Can the consumer afford the two bundles you described before now? Why?

Consider a consumer with an income of M = 200 in an economy with 3 goods. Let the prices be p1 = 4, p2 = 2 and p3= 21, respectively. a. Define the budget set facing the consumer. b. Find two bundles, (x1, x2, x3) and (y1, y2, y3) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? c. Suppose the price of good 3 decreases to p3= 15. Can the consumer afford the two bundles you described before now? Why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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