Budget set formation and explanations for concepts

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Reference no: EM1316155

a) Suppose M=8, P1=4, P2=2. Graph the budget set for this consumer.

b) Define the opportunity cost of good 1 in terms of good 2.

c) Determine the opportunity cost of good 1 at the point where x1=1.

d) Does the opportunity cost of 1 change as we move along the budget line? Explain.

e) Now suppose that M=16, P1=2, P2=4.Graph the consumer\'s budget set in this case

f) Can we rank these budget sets in terms of which is better for the consumer? Explain.

Reference no: EM1316155

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