A consumer is in equilibrium when Px = 7 and Py = 4, and he is consuming 40 units of good X and 80 units of good Y. If Py increases to Rs. 5, he moves to a new equilibrium where he consumes 50 units of good X. Beginning from the new equilibrium, if income increases by Rs 100 and the consumer decides to consume 65 units of good Y, what will be the shape of the ICC and the Engel curve? Calculate and explain. Also draw the demand curve for Y indicating the above scenario.
A consumer is in equilibrium when Px = 7 and Py = 4, and he is consuming 40 units of good X and 80 units of good Y. If Py increases to Rs. 5, he moves to a new equilibrium where he consumes 50 units of good X. Beginning from the new equilibrium, if income increases by Rs 100 and the consumer decides to consume 65 units of good Y, what will be the shape of the ICC and the Engel curve? Calculate and explain. Also draw the demand curve for Y indicating the above scenario.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 24SQ
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A consumer is in equilibrium when Px = 7 and Py = 4, and he is consuming 40 units of good X and 80 units of good Y. If Py increases to Rs. 5, he moves to a new equilibrium where he consumes 50 units of good X. Beginning from the new equilibrium, if income increases by Rs 100 and the consumer decides to consume 65 units of good Y, what will be the shape of the ICC and the Engel curve? Calculate and explain. Also draw the demand curve for Y indicating the above scenario.
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