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"Consider a consumer who is currently allocating $200/week between good X (he buys 7.5 units of X at a price of $10) and good Y (PY = $25). Note his current allocation on an indifference model (plot with Excel) you may use the curve tool to add the actual indifference curve --no need to plot it). Next, assume PX falls to $5.00. Note the change on your model and assume his consumption of X rises to 20. What happens to his consumption of Y? Calculate the coefficient of price elasticity and of cross price elasticity. Also draw the demand curves for X and Y, noting the equilibrium points for this consumer before and after the price change in X. Label all diagrams and show your work."
Why might it be difficult for the Fed to formally adopt inflation targeting? Would inflation targeting be a good policy for the Fed in the present economic environment
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