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Unformatted text preview: If the prices of sushi and hamburgers are both $3 and Mikes income is $30, show his budget 1 constraint and consumption choice(s). If the price of sushi goes up to $5, show Mikes new point of consumption. 4. ( 20 pts. ) Two people have identical convex indierence curves. If they live in dierent parts of the country and face dierent 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 (gure 3.13, 68 page) and one for corner solution (gure 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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This note was uploaded on 05/03/2008 for the course ECON 211 taught by Professor Na during the Spring '08 term at Rice.
- Spring '08