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Unformatted text preview: If the prices of sushi and hamburgers are both $3 and Mike’s income is $30, show his budget 1 constraint and consumption choice(s). If the price of sushi goes up to $5, show Mike’s new point of consumption. 4. ( 20 pts. ) Two people have identical convex indiﬀerence curves. If they live in diﬀerent parts of the country and face diﬀerent price ratios for steak and chicken, is it reasonable to assume that they consume the same combination of steak and chicken? Why or why not? explain, using graphs. (Hint: Analyze two cases; one for interior solution (ﬁgure 3.13, 68 page) and one for corner solution (ﬁgure 3.14, page 72).) 5. ( 25 pts. ) Paul sees that bags of potato chips are labeled “buy 3, get 1 free”. If the price of other goods is $1, he has an income of $30, and the price of a bag of chips is $2, draw his budget line. 2...
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- Spring '08
- Utility, pts, indifference curves, hamburgers perfect substitutes