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Analyzing the budget line & indifference map for two goods food & clothing.

469_food & clothing.jpg

The diagram below shows the budget line and the indifference map of a consumer for two products, food and clothing.

1.Compute the four points w, x, y, and z in terms of total utility and also affordability and describe why point z is the optional consumption point.

2.If there is a drop in the price of clothing, how will the budget line be affect? Illustrate what will happen to the consumption of clothing is a normal good?

 

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M922865

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