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Suppose that a consumer's income is 100 dollars which can be spent on either food (x) or clothes (y). One unit of food costs px
Suppose that a consumer's income is 100 dollars which can be spent on either food (x) or clothes (y). One unit of food costs px and a unit of clothes costs py. (a) Write the equation for budget line for this consumer. (b) Draw the budget set when px = 2 and py = 5. (c) Assume that px = 2 and py = 5 and consumer receives 10 units of food (x) from the government for free. Draw a budget line for this situation. (d) Now assume that the first 10 units of food cost each 2 dollars (px = 2 for the first 10 units). After 10 units are purchased each additional unit costs 5 dollars (px = 5 after 10 units) Draw a budget line for this situation
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