Preferences would make hikaru better off vs worse off

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Reference no: EM131253060

Hikaru consumes only sashimi and ps4 games. The price of a sashimi is p1 = $3 and the price of a ps4 game p2 = $10. Suppose that if Hikaru buys 10 pieces of sashimi and 6 ps4 games, he spends his income completely.

a. Find Hikaru’s income and plot his budget set. Label all axes and intercepts clearly.

b. Suppose the price of ps4 games rises to $15 but Hikaru receives an income aid of $15 in addition to his income from part (a). Plot his new budget set. With his new income and at the new ps4 game price, can Hikaru afford any consumption bundles that he could not afford in (a)? Indicate all such bundles on your graph.

c. How about the opposite – are there any consumption bundles that Hikaru could afford in (a) but he can no longer afford after price change and cash aid? Indicate them on your graph.

d. What sort of preferences would make Hikaru better off vs. worse off before and after the price and income changes?

Reference no: EM131253060

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