Consider a consumer with an income of M = 200 in an economy with 3 goods. Let the prices be p1 = 4, p2 = 2 and p3= 21, respectively. a. Define the budget set facing the consumer. b. Find two bundles, (x1, x2, x3) and (y1, y2, y3) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? c. Suppose the price of good 3 decreases to p3= 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 3 goods. Let the prices be p1 = 4, p2 = 2 and p3= 21, respectively. a. Define the budget set facing the consumer. b. Find two bundles, (x1, x2, x3) and (y1, y2, y3) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? c. Suppose the price of good 3 decreases to p3= 15. Can the consumer afford the two bundles you described before now? Why?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 6QP

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