Suppose a student has monthly income of Rs 20,000. He consumes only two commodities Sandwich and Shawarma. The cost of Sandwich is Rs 100 each, and the cost of Shawarma is Rs 200 each. a) Draw the student’s budget constraint. What is the slope of his budget constraint? b) Suppose student gets a raise, so his income increases from Rs 20,000 to Rs 24,000. Show what happens to consumer optimal consumption choice if both Sandwich and Shawarma are normal goods. Now show what happens if Sandwich is an inferior good. c) Suppose consumer income decreases to Rs. 16,000. Show what happens if both Shawarma and Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.
Suppose a student has monthly income of Rs 20,000. He consumes only two commodities Sandwich and Shawarma. The cost of Sandwich is Rs 100 each, and the cost of Shawarma is Rs 200 each. a) Draw the student’s budget constraint. What is the slope of his budget constraint? b) Suppose student gets a raise, so his income increases from Rs 20,000 to Rs 24,000. Show what happens to consumer optimal consumption choice if both Sandwich and Shawarma are normal goods. Now show what happens if Sandwich is an inferior good. c) Suppose consumer income decreases to Rs. 16,000. Show what happens if both Shawarma and Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.9P
Related questions
Question
Suppose a student has monthly income of Rs 20,000. He consumes only two commodities
Sandwich and Shawarma. The cost of Sandwich is Rs 100 each, and the cost of Shawarma is
Rs 200 each.
a) Draw the student’s budget constraint. What is the slope of his budget constraint?
b) Suppose student gets a raise, so his income increases from Rs 20,000 to Rs 24,000. Show
what happens to consumer optimal consumption choice if both Sandwich and Shawarma
are normal goods. Now show what happens if Sandwich is an inferior good.
c) Suppose consumer income decreases to Rs. 16,000. Show what happens if both Shawarma
and Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
