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How much does a bundle of bananas cost

02/10/2021 Client: muhammad11 Deadline: 2 Day

1. Suppose a consumer is maximizing utility consuming a bundle apples and bananas x and has standard preferences. Her budget constraint is given by the equation 1000-2a-2b0. Apples are normal goods and bananas are normal. a) plot the optimal bundle, showing the proper indifference curve and budget constraint. Call this bundle x1 b) show the effect of an increase of a single price increase for apples on the budget constraint. Use a hypothetical budget line to identify substitution effects for each good. Assume both goods are normal and indicate the appropriate income effect

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