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Hint: Draw two budget lines and indifference curves to better illustrate your answer. Assume that the initial price of good x and y are 10
Hint: Draw two budget lines and indifference curves to better illustrate your answer.
Assume that the initial price of good x and y are 10 and 10 respectively. Simon has an income of 100 and his initial bundle of consumption at A(5, 5). When the price of good x falls to 5 while good y rises to 15 while the income remains unchanged. Will Simon be able to consume initial bundle A? If yes, will Simon be rational if he continue to consume at initial bundle A? Explain your answer.
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