Mary has $100 to spend on goods X and Y. The price of Y is pY = $2.50. Mary has well-behaved preferences and two of her indifference curves are shown on the above graph along with some tangent points. don't need to use any utility functions or do any complicated math. 1.Suppose the price of X is $1.25. On the graph above, label Mary’s budget line as (BLA) and label Mary’s optimal consumption bundle as bundle A. 2.Now suppose the price of X rises to $5. On the graph above, label Mary’s budget line as (BLB) and label Mary’s optimal consumption bundle as bundle B. 3.On a separate graph, with X on the horizontal axis and PX (the price of good X) on the vertical axis, construct Mary’s demand curve for good X, carefully showing two points on Mary’s demand curve corresponding to the work you have done above.
Mary has $100 to spend on goods X and Y. The
don't need to use any utility functions or do any complicated math.
1.Suppose the price of X is $1.25. On the graph above, label Mary’s budget line as (BLA) and label Mary’s optimal consumption bundle as bundle A.
2.Now suppose the price of X rises to $5. On the graph above, label Mary’s budget line as (BLB) and label Mary’s optimal consumption bundle as bundle B.
3.On a separate graph, with X on the horizontal axis and PX (the price of good X) on the vertical axis, construct Mary’s demand curve for good X, carefully showing two points on Mary’s demand curve corresponding to the work you have done above.
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