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Suppose Tom has $60 in income and only buys cheese and tuna. Walmart charges $2 for a can of tuna and $4 for a block
Suppose Tom has $60 in income and only buys cheese and tuna. Walmart charges $2 for a can of tuna and $4 for a block of cheese. Tom shops at Walmart and buys 20 cans of tuna and 5 blocks of cheese. a) Draw the budget constraint and indifference for Tom (put Tuna on X-axis). b) Suppose Tom's income increases to $100, and his consumption of cheese increases to 6 blocks. Draw the new budget constraint and new optimal consumption bundle. c) Is tuna a normal or inferior good for Tom? Draw the Engel curve of tuna.
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