1. (x,y) A is the original consumption bundle of this consumer. Using graph, show the optimal bundle when the price of x doubles (i.e., p = 2px). 2. Draw a pivoted budget line. The pivoted budget line crosses the original consumption bundle, A, and has the same slope with the budget line under new prices (Pr. Py). 3. Show the optimal consumption bundle on the pivoted budget line.

1. (x,y) A is the original consumption bundle of this consumer. Using graph, show the optimal bundle when the price of x doubles (i.e., p = 2px). 2. Draw a pivoted budget line. The pivoted budget line crosses the original consumption bundle, A, and has the same slope with the budget line under new prices (Pr. Py). 3. Show the optimal consumption bundle on the pivoted budget line.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.13P

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