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Unformatted text preview: x doubles. What happens to the graph that you drew? Question 2: Budget Constraint Consider a person who has to decide how much of good x and y to consume. The price of good x , P x , is $5 and the price of good y , P y , is $10. The person has $100. The graph of the budget line is attached on the next page. 1) Describe the Consumption Possibilities Frontier on the graph. 2) What happens to the budget line if the persons income increases by 10%? 3) What happens to the budget line if both of the prices increase by 25%? 4) What happens if the rst 6 units of good y cost the same as before, but each additional unit of y is half-price? 1...
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This note was uploaded on 04/04/2012 for the course ECON 010 taught by Professor Stein during the Fall '07 term at UPenn.
- Fall '07