1. (x,y) A is the original consumption bundle of this consumer. Using graph, show the optimal bundle when the price of x doubles (i.e., p = 2px). 2. Draw a pivoted budget line. The pivoted budget line crosses the original consumption bundle, A, and has the same slope with the budget line under new prices (Pr. Py). 3. Show the optimal consumption bundle on the pivoted budget line.
1. (x,y) A is the original consumption bundle of this consumer. Using graph, show the optimal bundle when the price of x doubles (i.e., p = 2px). 2. Draw a pivoted budget line. The pivoted budget line crosses the original consumption bundle, A, and has the same slope with the budget line under new prices (Pr. Py). 3. Show the optimal consumption bundle on the pivoted budget line.
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.13P
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