Expert Solution

(a)

To determine

### Explanation of Solution

Since the income is $3,000 and price of good X is$25, the quantity of good X can be calculated as follows:

QuantityÂ ofÂ goodÂ X=IncomePriceÂ ofÂ goodÂ X=$3,000$25=120

Thus, the consumer will consume 120X.

Since the income is $3,000 and price of good Y is$200, the quantity of good Y can be calculated as follows:

QuantityÂ ofÂ goodÂ Y=IncomePriceÂ ofÂ goodÂ Y=$3,000$200=15

Thus, the consumer will consume 15Y.

Now, the budget constraint can be represented as follows:

In Figure 2, the vertical axis measures the quantity of good Y and the horizontal axis measures the quantity of good X.Â

Expert Solution

(c)

To determine

Draw the budget constraint when income = $2,000; PX =$40; PY = $150. ### Explanation of Solution Since the income is$2,000 and price of good X is $40, the quantity of good X can be calculated as follows: QuantityÂ ofÂ goodÂ X=IncomePriceÂ ofÂ goodÂ X=$2,000$40=50 Thus, the consumer will consume 50X. Since the income is$2,000 and price of good Y is $150, the quantity of good Y can be calculated as follows: QuantityÂ ofÂ goodÂ Y=IncomePriceÂ ofÂ goodÂ Y=$2,000\$150=13.33

Thus, the consumer will consume 13.33Y.

Now, the budget constraint can be represented as follows:

In Figure 3, the vertical axis measures the quantity of good Y and the horizontal axis measures the quantity of good X.Â

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