State intercept points with axes and critical kink points

Reference no: EM13236351

Suppose that there is a consumer who consumes 2 types of goods: Good A and Good B. The consumer has $84 and the price per unit of Good A is $4 and the price per unit of Good B is $7. However, the consumer is not completely free in making decisions as he is restricted by some policy rules. The government restricts the consumer in the following way: If he/she consumes more than 4 units of Good B, he/she gets 20% subsidy per unit of Good B consumed in excess of 4 units. Also, the maximum amount of Good B that can be consumed is 9 units. There is no restriction on the consumption of Good A. Draw the budget line with either Good A on the vertical axis or Good B on the vertical axis. Clearly state the intercept points with the axes and the critical kink points if there are any.

Reference no: EM13236351

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