In-Class Problem 06
Fall 2025, Econ 1B
Name:
x2
x1
1. For this question assume that our chooser has an income of 120 (i.e. m = 120) and that demands
are given by:
m
m
and x2 (p1 , p2 , m) =
.
x1 (p1 , p2 , m) =
p1 + p2
p1 + p2
(a) Assume prices are p1 = 4 and p2 = 1. Calculate the demands. Then, in the figure above, plot
the budget and demands.
(b) Assume prices are p1 = 3 and p2 = 1. Calculate the demands. Then, in the figure above, plot
the budget and demands.
(c) Assume prices are p1 = 2 and p2 = 1. Calculate the demands. Then, in the figure above, plot
the budget and demands.
(d) Assume prices are p1 = 1 and p2 = 1. Calculate the demands. Then, in the figure above, plot
the budget and demands.
(e) Assume prices are p1 = 1 and p2 = 1 but that income increases to m = 150). Calculate the
demands. Then, in the figure above, plot the budget and demands.