Graduate students at University of Massachusetts consume only two goods: rentalapartment space (good x) and sandwiches (good y).2020:I = $3,000Px = $4Py = $62021:I = $3,300Px = $5Py = $6Assume, in each year, all graduate students have the same income and face the same prices forapartments and sandwiches.However, graduate students have different preferences forapartments and sandwiches, but each student's preferences are consistent from year to year.Assume also that each student chooses his most preferred bundle given his budget set in eachyear.Denote the bundle in 2020 by (xo, yo) and this year's bundle by (x1, y1).a.What are the equations for their budget constraints in 2020 and 2021?b.What combination (bundle) of apartments and sandwiches is on graduatestudents' budget constraints in 2020 and 2021?On a carefully labeled graph with square feet on the horizontal axis, draw theс.budget constraints.d.Which students are better off this year, compared to last year? Which studentsare worse off this year, relative to last year?

Budget Constraint refers to the combination of two goods that a consumer can purchase with the given…

Answered: Graduate students at University of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In this hypothetical economy, there are two consumers living over two periods of life. Ann’s incomes are $50,000 in both periods. Meanwhile, Bob earns nothing in the first period but $105,000 in the second period. Both of them can borrow or lend at the interest rate r. For simplicity, assume that there are no taxes. a) Assume that both Ann and Bob consume $50,000 in the first period and $50,000 in the second period. Write down the lifetime budget constraint for each consumer then calculate the interest rate r. Describe the economic behavior of each consumer. b) Suppose the interest rate increases. What will happen to Ann’s consumption in the first period? Is Ann better off or worse off than before the interest rate rises? Explain your answer using an appropriate diagram c) What will happen to Bob’s consumption in the first period when the interest rate increases? Is Bob better off or worse off than before the interest rate increases? Explain your answer using an…
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please only do: if you can teach explain steps

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