1. Good A normally costs $50, but for any purchase of more than 10 units, a discounted price of $20 applies with no upper limit on the total quantity consumed. a. Show in a graph with Good A on the horizontal axis and "Others" on the vertical axis, draw the budget line if an income of $1000 is available and the price of "Others" is $10. b. From a. draw a set of indifference curves to show the situation that one can take advantage of the discounted price. c. From a. draw another set of indifference curves to show the situation that one cannot take any advantage of the discounted price given the limited consumption.
1. Good A normally costs $50, but for any purchase of more than 10 units, a discounted price of $20 applies with no upper limit on the total quantity consumed. a. Show in a graph with Good A on the horizontal axis and "Others" on the vertical axis, draw the budget line if an income of $1000 is available and the price of "Others" is $10. b. From a. draw a set of indifference curves to show the situation that one can take advantage of the discounted price. c. From a. draw another set of indifference curves to show the situation that one cannot take any advantage of the discounted price given the limited consumption.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:1. Good A normally costs $50, but for any purchase of more than 10 units, a discounted price
of $20 applies with no upper limit on the total quantity consumed.
a. Show in a graph with Good A on the horizontal axis and "Others" on the vertical axis,
draw the budget line if an income of $1000 is available and the price of "Others" is $10.
b. From a. draw a set of indifference curves to show the situation that one can take
advantage of the discounted price.
c. From a. draw another set of indifference curves to show the situation that one cannot
take any advantage of the discounted price given the limited consumption.
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