Sub part (a): Explanation The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand. The indifference curve is the graphical representation of different combinations of two commodities that provide the same level of satisfaction to the consumer. Since the level of satisfaction is same at every point, the consumer will be indifferent amongst them. When the price of pizza goes down, it helps the consumer to consume more pizzas or more sodas due to the increase in the real income of the consumer... Sub part (b): To determine The change in the price of relative commodities. Sub part (c): To determine The change in the price of relative commodities.

The change in the price of relative commodities.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN: 9781285165875

Author: N. Gregory Mankiw

Publisher: Cengage Learning

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Question

Chapter 21, Problem 3PA

Sub part (a):

To determine