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Problem regarding the optimal consumption bundle

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Eva has 48$ which she decides to spend on x and y. Commodity x costs 5$ per unit and commodity y costs 6$ per unit. Her preferences over these commodities could be presented by the utility function U(x,y)= min {5x, 2y}.

A) Draw her indifference map (2 sample indifference curves are enough) and her budget line.

B) How many x and y will she choose?

C) Suppose price of y drops to 4$. What is her optimal consumption bundle after this change? Decompose Eva's changes in consumption of x into income and substitution effects for the two commodities.

Reference no: EM131254013

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