.9. Write down two budget lines: for { p1 = 1 ,pg 2 1 ,W = 1)...
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Question:
.9. Write down two budget lines: for { p1 = 1 ,pg 2 1 ,W = 1) and for ( p1 = 1,p2 = 1,W = 2). Find, graphically, the optimal consumption bundles by tangentn,r of the budget set and the indifference curve. You should find that 323;] , 1 , 1) = 3:31, 1, 2); this means that there is no income effect in good 1 and the increase in income affects only the consumption of good 2. Interpret this result in light of your answer to point 4