Monica has been considering buying a mountain bike. Last month Monica had an income of $30,000. The bike’s price was $1000, the composite good price was $1, and she decided not to buy the bike. This month Monica was surprised to get a $10,000 increase in income. The prices of the bike and the composite good are the same, but now Monica decides to buy the bike. Draw a budget line and indifference curves to illustrate this situation. Be sure to label you diagram completely.
A case study where Monica considers buying a mountain bike. The differences in her income for the last two months are given. Budget line and indifference curves are drawn.Download Full Solution
If you are here for the first time, you can request for a discount coupon, which can knock off upto 20% of the quoted price on any service.