The utility function for an individual is given as u (x; y)= xy. Suppose that his income is $ 100 and the price of Good Y is$ 10 per unit. However, Good X is priced somewhat different. It is priced as follows: The first 6 units cost $ 10 per unit andany additional units cost $ 5 per unit.a) Draw this individual's budget constraint.b) What consumption bundle will this individual choose?

This individual's budget constraint: The utility function for an individual is given as u(x:y)= xy…

Answered: The utility function for an individual…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Given above are some of the indifference curves for a student who consumes Burritos and Pizzas and the relevant budget line. Equilibrium is defined as the maximum utility or satisfaction given the consumer’s budget. The consumer has more indifference curves above I3, below I1, and between I1 and I2 and between I2 and I3. Out of all the indifference curves the consumer has, only I1, I2, and I3 are shown. The given budget line touches I2 at the point where I2 touches the y-axis (Burritos axis). a) If the price of Pizzas decreased and the price of Burritos remained unchanged, would the quantity of Burritos consumed at equilibrium increase or decrease compared to the equilibrium point A in the graph given above? (b) If the price of Pizzas increased and the price of Burritos remained the same, would the consumer equilibrium point be different from point A or the same as point A in the graph given above?
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