Question
(See the attached diagram for reference) Income and Substitution Effects.Suppose that you consume housing and all other goods in the U.S., at the equilibrium shown
(See the attached diagram for reference)
Income and Substitution Effects.Suppose that you consume housing and all other goods in the U.S., at the equilibrium shown in the diagram below.Your company transfers you to Tokyo, where housing is much more expensive and other goods cheaper than in the United States.Your company compensates you so that you are able to consume exactly the same consumption bundle as in the U.S.(Again, this point is shown below.)Would your utility change? hint: you need to draw a new budget line reflecting the relative prices in Tokyo that goes through the original consumption point.)Explain briefly, and demonstrate on the graph below.
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