1) Using two goods that you have purchased in the past 3 months (be specific), display...

 

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1) Using two goods that you have purchased in the past 3 months (be specific), display a budget constraint for the two using the actual current market prices for each. Assuming you have a budget constraint of $100 to spend on the two goods, explain why you chose those. What would happen if the price of one (your choice) increased by 10%? 2) Using your choices from the first problem, illustrate your indifference curve between the two goods. Explain to what extent you are willing to give up one for the other, and vice versa, drawing from your actual consumption habits in the past 3 months. Are these compliments or substitutes for you? Explain. 3) Illustrate your indifference curve in problem 2 with your original budget constraint in problem 1. What is your consumption bundle of the two goods? Now adjust the budget constraint as you did in the first problem, with the price of one of the goods increasing by 10%. What is your new consumption bundle? Does this match with your previously stated consumption habits? Explain. 1) Using two goods that you have purchased in the past 3 months (be specific), display a budget constraint for the two using the actual current market prices for each. Assuming you have a budget constraint of $100 to spend on the two goods, explain why you chose those. What would happen if the price of one (your choice) increased by 10%? 2) Using your choices from the first problem, illustrate your indifference curve between the two goods. Explain to what extent you are willing to give up one for the other, and vice versa, drawing from your actual consumption habits in the past 3 months. Are these compliments or substitutes for you? Explain. 3) Illustrate your indifference curve in problem 2 with your original budget constraint in problem 1. What is your consumption bundle of the two goods? Now adjust the budget constraint as you did in the first problem, with the price of one of the goods increasing by 10%. What is your new consumption bundle? Does this match with your previously stated consumption habits? Explain.

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1 I will use two goods that I have purchased in the past 3 months a jar of peanut butter 499 and a l... View the full answer