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Question - A few basketball tickets are allocated via random assignment to the students free of charge (one ticket per person). Tickets could also be bought at the price of $10/ticket. Consider two situations: (1) resale of tickets is prohibited (assume perfect enforcement); and (2) resale is allowed and the market price remains at $10/ticket. Assume that each student's income is $I. On the graphs below make sure to indicate the coordinates of all relevant points such as intercepts, kinks, and optimal consumption points.

(i) Draw the budget constraints under (1) and (2) for the students who have received free tickets. Put "all other goods" (AOG) on the vertical axis.

(ii) Draw a smooth convex utility indifference curve and indicate optimal consumption point for a student who chooses not to resell the ticket under (2).

(iii) Draw a smooth convex utility indifference curve and indicate optimal consumption point for a student who chooses to resell the ticket under (2).

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92503718
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