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Q4. (3 points) Jen only consumes Kraft dinners and steaks. One day, Jen's income increases, with no change in the price of steaks and no
Q4. (3 points) Jen only consumes Kraft dinners and steaks. One day, Jen's income increases, with no change in the price of steaks and no change in the price of Kraft dinners. Assume that Jen's preferences are strictly convex, transitive, and that she always prefers more to less. a) (1 point) Using a graph of indifference curves and budget constraints, show that the income increase can lead to a decrease in Jen's consumption of Kraft dinners. Draw a graph that shows each budget constraint, both optimal consumption point (before and after income change), and any indifference curve that goes through either optimum point. Carefully label each axis, each budget constraint, and each optimum. Place quantity of Kraft dinners on the horizontal axis. b) (1 point) Repeat (a) but now show that the income increase can lead to an increase in Jen's consumption of Kraft dinners (obviously, she then has different tastes than those depicted in (a)). b) (1 point) Can the income increase lead to a decrease in Jen's well-being? Write either \" YES\" or \"NO\" in big letters
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