A typical indifference curve for ryszard is drawn in black

Reference no: EM13498390

Ryszard consumes two goods, x and y. His utility function is given by u = 4 + x for y >= 4 and by u = x + y for y < 4. Note that his relevant indifference curves are piecewise linear with kinks that lie along the tan horizontal line. A typical indifference curve for Ryszard is drawn in black.
3.1. Ryszard's income is $24, the initial price of x is $12, and the price of y is $3. Use the blue line tool (circle symbol) to draw his initial budget line. Use the green line segment tool (triangle symbol) to draw the highest indifference curve that Ryszard can attain.

The price of x then drops to $2; the price of y and income are unchanged. Use the red line tool (cross symbol) to draw his final budget line. Use the orange line segment tool (square symbol) to draw the highest indifference curve Ryszard can attain on the ending budget.

Assuming that the price of x drops continuously from $12 to $2, use the purple line segment tool (diamond symbol) to draw his price consumption curve.

Reference no: EM13498390

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