Economics 5.odt - Suppose you have two goods pencils and...

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Suppose you have two goods: pencils and coffee. You like both of the goods. Initially, you spend your income on both goods, but once your income is $10 or higher, you no longer purchase additional pencils. The price of coffee and the price of pencils stays fixed.(a) Graphically describe these preferences. Graph at least 3 optimal bundles of pencils and coffee. (You must show both the budget constraint and indifference curve for each optimal bundle).Example of how you graphs should look24613284Balloons (packages)Candy(lbs)Price-Consumption Curve369264128Price of Balloons($)Balloons (packages)Individual Demand Curve
(b) Graph the Engel curve described for pencils.

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