Consider a consumer with an income of M = 200 in an economy with 2 goods. Let the prices be p1 = 7, and p2 = 12, respectively. Define the budget set facing the consumer. In a well labelled diagram, illustrate the budget set for the consumer. Find two bundles, (x1,x2) and (y1,y2) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? Suppose the price of good 2 decreases to p2(prime) = 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 2 goods. Let the prices be p1 = 7, and p2 = 12, respectively. Define the budget set facing the consumer. In a well labelled diagram, illustrate the budget set for the consumer. Find two bundles, (x1,x2) and (y1,y2) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? Suppose the price of good 2 decreases to p2(prime) = 15. Can the consumer afford the two bundles you described before now? Why?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 19SQ

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