Francesco is a young economist working as an intern for the European Commission in Brussels. While...

  

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Francesco is a young economist working as an intern for the European Commission in Brussels. While working, he is also writing his Master thesis at Bocconi and this is the last week before the official submission. Hence, his weekly schedule is very full and he needs a lot of caffeine. He considers coffee, r1, and tea, r2, to be perfect substitute goods: he receives the same utility from consuming 1 cup of coffee or 3 cups of tea. Prices of cups of coffee and cups of tea are pi and p2, respectively. His income available to be spent on tea and coffee amounts to I. 9. Show it on the graph. 10. Suddenly, on Wednesday, the price of coffee increases to p = 2 €. Show how this change affects the budget constraint line on your graph. 11. Find Francesco's new optimal bundle, r" = (2", a;") after the price change. %3D 12. Show it on the graph. Francesco is a young economist working as an intern for the European Commission in Brussels. While working, he is also writing his Master thesis at Bocconi and this is the last week before the official submission. Hence, his weekly schedule is very full and he needs a lot of caffeine. He considers coffee, r1, and tea, r2, to be perfect substitute goods: he receives the same utility from consuming 1 cup of coffee or 3 cups of tea. Prices of cups of coffee and cups of tea are pi and p2, respectively. His income available to be spent on tea and coffee amounts to I. 9. Show it on the graph. 10. Suddenly, on Wednesday, the price of coffee increases to p = 2 €. Show how this change affects the budget constraint line on your graph. 11. Find Francesco's new optimal bundle, r" = (2", a;") after the price change. %3D 12. Show it on the graph.

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Answer u 2 x 3x2 Piz P222 I budget con... View the full answer