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Bob consumes two commodities: x and y (say, chocolate and classical music). More y never hurts, but in order to enjoy y he has to consume at least 4 units of it; put differently, he starts to enjoy y after the fourth unit. (In order to appreciate y he must first develop a taste for it.) Regardless of the amount of y he consumes, Bob thinks that more x is always strictly better than less. Moreover, he (strictly) prefers the bundle (x,y) over (x', y'); where both y and y' are at least 4, if and only if x *y > x'* y'.

Bob has an income of $100. The price of x is $1, and the price of y is py. For what values of py will Bob buy y, and for what values of py will Bob buy only x?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M940425

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