Question

Mr. R. Plane, a retired college administrator, consumes only grapes and the composite good Y (PY = $1). His income consists of $10,000/yr from social security, plus the proceeds from whatever he sells of the 2000 bushels of grapes he harvests annually from his vineyard. Last year, grapes sold for $2/bushel, and Plane consumed all 2000 bushels of his grapes in addition to 10,000 units of Y. This year the price of grapes is $3/bushel, while PY remains $1. If his in-difference curves have the conventional shape, will this year’s consumption of grapes be greater than, smaller than, or the same as last year’s? Will this year’s consumption of Y be greater than, smaller than, or the same as last year’s? Explain.



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  • CreatedDecember 12, 2014
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