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If I spent all my wealth (money, $300,000) on a new house I could buy a house with 3000 square feet. Based on my utility considering the bundle price and square feet, I settle for a 1500 square foot house. (Each square foot costs the same.) The day after I close the deal a nearby nuclear power plant is condemned and the value of homes in the entire area is cut in half. Show graphically what happens to my utility level and elucidate why the result is plausible. Consider that your wealth is on the vertical axes and square feet on the horizontal axes. Your budget is a combination of wealth and square feet. Put numbers on your graph showing the wealth and housing possibilities after the housing prices fall.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9221565

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