Draw in the resulting equilibria or tangencies and join up


Draw an indifference map again, in conjunction with a set of budget constraints. This time the budget constraints should each have a different price of good X and the same price for good Y.

(a) Draw in the resulting equilibria or tangencies and join up all of these points. You have just constructed a price-consumption curve for good X. Can you understand why the curve is so called?

(b) Now repeat part (a), but keep the price of X constant and permit the price of Y to vary. The resulting set of equilibrium points will form a price consumption curve for good Y.

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Econometrics: Draw in the resulting equilibria or tangencies and join up
Reference No:- TGS01418321

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