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2 Deriving demand The following Figure shows a map of indifference curves of a certain individual. This is a graphical exercise, so your answer will

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2 Deriving demand The following Figure shows a map of indifference curves of a certain individual. This is a graphical exercise, so your answer will be approximate; however, try to be as accurate as possible. 1. Suppose that this individual's wealth is m = 1000. Price of the rst good (measured on the an axis) is pw 2 20, and the price of the second good (which is measured on the y axis) is pg 2 22. Draw the budget line and indicate on the Figure the optimal consumption bundle of this inlividual. 10 20 30 40 50 Figure 2: Deriving demand 2. This question will ask you to derive this individual's demand for x (when price of y stays at Py = 22 and income at m = 1000). Select a few higher prices of x and indicate the corresponding consumption bundles on the Fig- ure. You will obtain price-quantity data that can be entered in the following table 20 3. Now suppose that the price of y is py = 38. Derive a few points of this individual's demand for x (when price of y is py = 38 and income at m = 1000)? 4. Draw two demand functions of this individual for x - first for the case of Py = 22, m = 1000 and the second for the case of Py = 38, m = 1000. Remember that the convention is to put the price on the vertical axis and the quantity of the good on the horizontal axis

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