Suppose a student has monthly income of Rs 10,000. He consumes only two commodities Sandwich and Shawarma. The cost of Sandwich is Rs 50 each, and the cost of Shawarma is Rs 100 each. a) Draw the student's budget constraint. What is the slope of his budget constraint? b) Suppose student gets a raise, so his income increases from Rs 10,000 to Rs 12,000. Show what happens to consumer optimal consumption choice if both Sandwich and Shawarma are normal goods. Now show what happens if Sandwich is an inferior good. c) Suppose consumer income decreases to Rs. 8,000. Show what happens if both Shawarma and Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
Suppose a student has monthly income of Rs 10,000. He consumes only two commodities
Sandwich and Shawarma. The cost of Sandwich is Rs 50 each, and the cost of Shawarma is
Rs 100 each.
a) Draw the student's budget constraint. What is the slope of his budget constraint?
b) Suppose student gets a raise, so his income increases from Rs 10,000 to Rs 12,000. Show
what happens to consumer optimal consumption choice if both Sandwich and Shawarma
are normal goods. Now show what happens if Sandwich is an inferior good.
c) Suppose consumer income decreases to Rs. 8,000. Show what happens if both Shawarma
and Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.
Transcribed Image Text:Suppose a student has monthly income of Rs 10,000. He consumes only two commodities Sandwich and Shawarma. The cost of Sandwich is Rs 50 each, and the cost of Shawarma is Rs 100 each. a) Draw the student's budget constraint. What is the slope of his budget constraint? b) Suppose student gets a raise, so his income increases from Rs 10,000 to Rs 12,000. Show what happens to consumer optimal consumption choice if both Sandwich and Shawarma are normal goods. Now show what happens if Sandwich is an inferior good. c) Suppose consumer income decreases to Rs. 8,000. Show what happens if both Shawarma and Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 1 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education