Question

In: Economics

J. Doe has an income of $60, which is divided between two goods: Xers (X) which costs $3 each, and Yers (Y), which costs $4 each.

J. Doe has an income of $60, which is divided between two goods: Xers (X) which costs $3 each, and Yers (Y), which costs $4 each. When prices and income are at these levels, Doe chooses the consumption bundle X = 12 and Y = 6.

Suppose the price of Xer falls to $2, but simultaneously the price of Yer increases to $6. Is Doe better off, worse off, or exactly as well off as before? Explain your reasoning using a graph.

(instead of drawing the actual graph, briefly explain the graph instead. Explain all the curves, shifts, points and axis, intersections and labels etc).

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
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