1a. Explain the difference between an Endogenous budget constraint and an Exogenous budget constraint.

b. Exogenous budget constraint: Consider a consumer who spends her income Y on positive amounts of 3 goods; x1, x2, x3. Explain why if p1 rises x3 must fall , if x1 and x2 are held constant.

c. Endogenous constraint problem: If instead of budget constraint Y=p1x1 + p2x2 consumers are endowed with some amounts of x1 and x2 . In an endogenous constraint case, show that dx2/dp2=0 , with x1 held constant, only of x1= the endowed amount of x1.