Question
Context: Kerry has a budget of $M to spend on two goods: X and Y. The price of good X is $6 per unit and
Context: Kerry has a budget of $M to spend on two goods: X and Y. The price of good X is $6 per unit and that of good Y is $4 per unit. At the most affordable point, Kerry consumes 6 units of good X and A units of good Y.
Copy the budget line and indifference curve I3. Suppose the prices of good X decrease by $2 per unit. Sketch the new budget line in the diagram and indicate the new equilibrium point using an additional indifference curve. (**This is completed below**)
Is it possible that when the price of good X goes down, its consumption also goes down?
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