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PROBLEM #4 [6 points]: Suppose that you are a senior economic analyst for Health Canada. You are given the following information from the Data Analysis Unit on the choice behaviour between medical services (MS) and other consumption spending (C) of the representative senior citizen in Canada. CHOICE #1: PMS = $15 Pc = $10 M = $2500 MS = 100 and C = 100. CHOICE #2: PMS = $10 Pc = $15 M = $2500 MS = 70 and C = 120. CHOICE #3: PMS = $10 Pc = $10 M = $2500 MS = 125 and C = 125. where PMS = price of medical services, Pc = price of other consumption, and M = income. a) In the MS-C space provided below carefully draw and label all three budget lines described by the data. Identify the chosen bundle of goods for each budget line (choice 1, choice 2, choice 3) [3 points] MS 250 C 250 

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PROBLEM #4 (continued): b) Given your diagram in part b), is the representative senior
citizen behaving in a rational manner under all price combinations? Explain using the
Weak Axiom of Revealed Preferences (WARP). [3 points]
 

PROBLEM #4 [6 points]: Suppose that you are a senior economic analyst for Health Canada. You are given the following information from the Data Analysis Unit on the choice behaviour between medical services (MS) and other consumption spending (C) of the representative senior citizen in Canada. CHOICE #1: CHOICE #2: CHOICE #3: MS PMS = $15 PMS = $10 PMS = $10 250 Pc = $10 Pc = $15 Pc = $10 M = $2500 M = $2500 M = $2500 where PMs = price of medical services, Pc = price of other consumption, and M = income. a) In the MS-C space provided below carefully draw and label all three budget lines described by the data. Identify the chosen bundle of goods for each budget line (choice 1, choice 2, choice 3). [3 points] MS 100 and C = 100. MS = 70 and C = 120. MS 125 and C = 125. 250 C