We observe the consumption behavior of a given consumer

QUESTION

We observe the consumption behavior of a given consumer in 5 dier-ence price-income settings. The following table summarize prices andconsumption in each of these settings. There is only two goods.Setting p1 p2 x1 x2A 1 1 5 35B 1 2 35 10C 1 1 10 15D 3 1 5 15E 1 2 10 10a. Draw each budget line. Represent the chosen bundles, namingthem respectively A, B, C, D, E.b. Is this consumer’s behavior compatible with the weak axiom ofrevealed preferences?c. Circle in red those points you are sure they bring less utility thanbundle C.d. You are told this consumer’s preferences are monotonic and con-vex, and that his behavior follows the strong revealed preferencesaxiom. Circle in blue all the points you are sure they bring atleast as much utility as bundle C.

ANSWER:

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