Illustrate an optimal consumption bundle

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Reference no: EM133130535

Max loves dinosaur figurines and miniature buildings. He enjoys both more when he has some of each but would generally prefer a second dinosaur to a second building. He has $200 to spend on dinosaurs and buildings this month. The price of a dinosaur is $10 and the price of a building is $15.

A) Graph Max's budget constraint and a couple of his indifference curves then illustrate an optimal consumption bundle for him.

B) Suppose I tell you that I've calculated Max's optimal consumption bundle and found that he should buy 10 buildings and 5 dinosaurs. Are my calculations likely correct or incorrect? How do you know?

C) Suppose the price of buildings decreases to $10. Graph his new budget constraint and show the change in optimal consumption.

D) Starting from the position of the original budget constraint, illustrate what would happen to Max's optimal consumption if he received a $60 stimulus check.

Reference no: EM133130535

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