Question
What is the Engel curve? Illustrate it using indifference curves. A consumer buys 25 of good X and 10 of good Y with a hundred
What is the Engel curve? Illustrate it using indifference curves.
A consumer buys 25 of good X and 10 of good Y with a hundred dollars (her preference is as follow: U=Min{X,2.5Y}). The prices for goods X and Y are 2$ and 5$, respectively. If the price for good Y decreases to 1.25$, how many of X and Y will she buy, alternatively
Using the information in the previous question , illustrate the substitution and income effects when the price for good Y changes. Explain (and illustrate) what types of goods X and Y are (while illustrating, do not violate the properties of the indifference curves/consumers' behavior).
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