Illustrate an initial equilibrium for the consumer

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Reference no: EM13202294

Suppose a consumer has an income of $1000 and faces prices Px = $5 and Py = $10.
(a). Write the equation for this consumer's budget constraint.
(b). Draw the budget constraint, placing Good X on the horizontal axis. Label it BC.
(c). Suppose the price of Good Y falls to $5 (all else equal). Draw the new budget constraint and label it RS.
(d). On your graph, illustrate an initial equilibrium for this consumer and how it has changed in response to the price decrease of Good Y.

Reference no: EM13202294

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