Question: 7. Consider the case where a retail store makes a buy two and get one free offer for commodity X but not for commodity Y.

 7. Consider the case where a retail store makes a \"buy

two and get one free offer\" for commodity X but not for

7. Consider the case where a retail store makes a \"buy two and get one free offer\" for commodity X but not for commodity Y. Let I be the consumer's income and take the price for each commodity to be 1. [30 points total] (a) Draw a picture of the resulting budget set. [10 points] (b) If the consumer has \"textbook" indifference curves exhibiting strictly diminishing marginal rate of substitution (M RS), does demand satisfy the usual condition that the marginal rate of substitution equals the price ratio? Be precise in your answer and explain briefly. [10 points] (0) Suppose instead that the consumer has right angle \"left and right gloves\" indifference curves. What can we say now about demand? Explain briefly. [10 points]

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!