Now suppose that Maya’s income increases such that she can afford a monthly budget of £300 for electricity and treats. Reproduce your diagram for Question 2 and show how the increase in her budget changes her point of utility maximisation. Explain your answer
Part A (40% of the marks) Maya can afford a monthly budget of £200 for treats and electricity. Assume that both are normal goods. Suppose that the prices are £20 per unit for electricity and £10 per treat. Draw a diagram showing Maya’s budget constraint and feasible consumption set. Explain your answer. Your diagram should […]