Suppose the price of product X is Rs.500 and the price of product Y is Rs.1000 and one of a family has Rs.50,000 to spend per month on product X and Y.

a. Sketch the household budget constraint.

b. Assume that the household splits its income equally between X and Y. Show where the household ends up on the budget constraint.

c. Suppose the household income doubles to Rs.100,000. Sketch the new budget constraint facing the household.

d. Suppose after the change the household spends Rs.20,000 on Y and Rs.80,000 on X. Does this imply that X is a normal or an inferior good? What about Y?

e. Suppose the household income reduced to Rs.25,000. Sketch the new budget constraint facing the household

. f. Suppose after the change the household spends Rs.20,000 on Y and Rs.5,000 on X. Does this imply that Y is a normal or an inferior good? What about X?