Indifference Curves and budget lines. a) Using a properly labeled indifference graph for good X (horizontal...

   

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Indifference Curves and budget lines. a) Using a properly labeled indifference graph for good X (horizontal axis) and Good Y, illustrate how the indifference curves and budget lines would look to achieve a normal downward sloping demand curve for Good A. Also show the demand curve for good X on a properly labeled graph. b) Explain what is happening with the substitution effect and income effect. c) Explain how these effects (sub and inc) would differ if the demand curve was very elastic. (consider the slope of the curve). Indifference Curves and budget lines. a) Using a properly labeled indifference graph for good X (horizontal axis) and Good Y, illustrate how the indifference curves and budget lines would look to achieve a normal downward sloping demand curve for Good A. Also show the demand curve for good X on a properly labeled graph. b) Explain what is happening with the substitution effect and income effect. c) Explain how these effects (sub and inc) would differ if the demand curve was very elastic. (consider the slope of the curve).

Answer rating: 100% (QA)

a To illustrate the indifference curves and budget lines that would result in a normal downward sloping demand curve for Good A we need to understand the concept of consumer preferences and budget con... View the full answer