# indifference curves

Jul 20th, 2015
SKTFaker
Category:
Economics
Price: \$20 USD

Question description

Suppose that Wilma’s income is \$56,000 per year. She can spend it on healthcare visits (V) or on all other goods (OG). The price per V is \$70, and the price per OG is \$150.

a. Draw Wilma’s budget constraint (put V on the horizontal and OG on the vertical axis). Using indifference curves, show Wilma’s optimum if she buys 366.33 OG per year.

b. Suppose that Wilma’s income rises to \$70,000 per year, and that she increases her consumption of V by 3. Show the new equilibrium on the graph. What is her income elasticity of demand for V?

(Top Tutor) Daniel C.
(997)
School: Rice University

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SoccerBoss
Jul 21st, 2015
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