Consider a consumer who faces a price of 7 per unit on good x and 9 per unit on good y, and the consumer has an income M = $2520. Knowing nothing about the consumer's utility other than they obey the basic rules set out in the text (more is better, etc.) explain, using diagrams of the budget sets where you specifically label the intercepts, whether the consumer is better off, worse off, or cannot tell if:

a) the price of good x increases to 10 per unit

b) the person's income increases to $3150

c) both of these changes happen at the same time.

Answer rating: 100% (QA)

a The price of goods x to 10 per unit The new equation is 10x 9y 2520 Put x 0 100 9y 2520 9y 2520 y ... View the full answer