Consider a two good consumer choice model in which a consumer with well-behaved preferences faces standard budget constraints with prices p1 and p2 and income m.
Consider a two good consumer choice model in which a consumer with
well-behaved preferences faces standard budget constraints with prices p1 and p2 and income m.
(a)Say that for this consumer good is ordinary and good 2 is inferior. Sketch a diagram on axes x1, x2 with two different budget lines, indifference curves, and optimal choices that illustrates an example of what this looks like.
In the situation in a), what shape does this consumer’s Engel curve for each good have and why?
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