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Unformatted text preview: same direction as each other, or in opposite directions from each other? 6. Draw and label a compensated price change in p L if my utility is given by u(x L , x R ) = min [x L , x R ]. 7. Draw and label the compensated (Hicksian) demand curve for left shoes (good x L ) if my utility is given by u(x L , x R ) = min [x L , x R ]. 8. Goods 1 and 2 are complements. Using 3 budget lines and 2 indifference curves illustrate the effect of a decrease in p 1 (the price of the first good) on the consumption of good x 2 (the second good). Show and label the income and substitution effects. 9. A consumer consumes only 2 goods, x 1 and x 2 . Can both be inferior? If so, use 2 indifference curves and 2 budget lines to show the effects of an increase in I on consumption of good 1 and good 2. If not, draw the same graph, and show how the consumption bundle chosen after the increase in I would have to be in 2 different places....
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- Spring '07