Suppose there are three goods in the world: x1 , x2 and x3. A: On a 3-dimensional

Question:

Suppose there are three goods in the world: x1 , x2 and x3.
A: On a 3-dimensional graph, illustrate your budget constraint when your economic circumstances are defined by p1 = 2, p2 = 6, p3 = 5 and I = 120. Carefully label intercepts.
(a)What is your of x1 in terms of x2? What is your of x2 in terms of x3?
(b) Illustrate how your graph changes if I falls to $60. Does your answer to (a) change?
(c) Illustrate how your graph changes if instead p1 rises to $4. Does your answer to part (a) change?
B:
Write down the equation that represents your picture in 2.4A. Then suppose that a new good x4 is invented and priced at $1. How does your equation change? Why is it difficult to represent this new set of economic circumstances graphically? Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...