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