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20 Aug 2018
4. (4 points) Elvis only consumes Kraft dinners and steaks. One day, the price of Kraft dinners decreases, with no change in the price of steaks. a) (3 points) Using a graph of indifference curves and budget constraints, show that the price decrease can lead to a decrease in Elvis's consumption of Kraft dinners. Draw a graph that shows each budget constraint, optimal consumption point, and each indifference curve that goes through an optimum point. Carefully label each axis and each optimum. Place quantity of Kraft dinners on the horizontal axis. b) (1 point) Can the price decrease lead to a decrease in Elvis's well-being? Explain using a graph of budget constraints.
4. (4 points) Elvis only consumes Kraft dinners and steaks. One day, the price of Kraft dinners decreases, with no change in the price of steaks. a) (3 points) Using a graph of indifference curves and budget constraints, show that the price decrease can lead to a decrease in Elvis's consumption of Kraft dinners. Draw a graph that shows each budget constraint, optimal consumption point, and each indifference curve that goes through an optimum point. Carefully label each axis and each optimum. Place quantity of Kraft dinners on the horizontal axis. b) (1 point) Can the price decrease lead to a decrease in Elvis's well-being? Explain using a graph of budget constraints.
Hubert KochLv2
23 Aug 2018
