Problem 1:

Slide #1 figure: A consumer is initially in equilibrium at point C.

The consumer's income is $300, and the budget line through point C is given by

$300 = $50X + $100Y. When the consumer is given a $50 gift certificate that is good

only at store X, she moves to a new equilibrium at point D.

a. Determine the prices of goods X and Y.

b. How many units of product Y could be purchased at point A?

c. How many units of product Y could be purchased at point E?

d. How many units of product Y could be purchased at point B?

e. How many units of product Y could be purchased at point F?

f. Based on this consumer's preferences, rank bundles A, B, C, and D

in order from most preferred to least preferred.

g. Is product X a normal or an inferior good?

Please see attached for full question.

Default Design

Slide #1 figure: A consumer is initially in equilibrium at point C.

The consumer's income is $300, and the budget line through point C is given by

$300 = $50X + $100Y. When the consumer is given a $50 gift certificate that is good

only at store X, she moves to a new equilibrium at point D.

a. Determine the prices of goods X and Y.

b. How many units of product Y could be purchased at point A?

c. How many units of product Y could be purchased at point E?

d. How many units of product Y could be purchased at point B?

e. How many units of product Y could be purchased at point F?

f. Based on this consumer's preferences, rank bundles A, B, C, and D

in order from most preferred to least preferred.

g. Is product X a normal or an inferior good?

Please see attached for full question.

Default Design