Peter has an endowment of 3 units of good x and 5 units of good y. He can buy and sell x at a price of 100 and y at the price of 200. He receives an income of $700 as alimony from a former spouse. a) Draw Peter’s budget line for x and y. Show his initial endowment of x and y on your diagram. b) Calculate the amount of x that he could afford if he bought only x and the amount of y he could afford if he bought only y. c) Write an equation for Peter’s budget.

Peter has an endowment of 3 units of good x and 5 units of good y. He can buy and sell x at a price of 100 and y at the price of 200. He receives an income of $700 as alimony from a former spouse. a) Draw Peter’s budget line for x and y. Show his initial endowment of x and y on your diagram. b) Calculate the amount of x that he could afford if he bought only x and the amount of y he could afford if he bought only y. c) Write an equation for Peter’s budget.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.5P

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