Assume That a Consumer Faces the Following Budget Constraints

question 310

Essay

Assume that a consumer faces the following budget constraints.
a.
Assuming that income is the same on both occasions,describe the difference in relative prices between Panel A and Panel B.
b.
If income in Panel B is $126,what is the price of good X?
c.
If income in Panel A is $84,what is the price of good Y?
d.
Assuming that the price of good X is the same on both occasions,describe the difference in income and price of good Y between Panel A and Panel B.

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Definitions:

Reality Principle

A psychoanalytic concept that represents the ability of the mind to assess the external world and act upon it accordingly, as opposed to acting on the pleasure principle.

Freud

An Austrian neurologist and the founder of psychoanalysis, known for his theories on the unconscious mind, developmental stages, and defense mechanisms.

Ego

Refers to the part of the mind that mediates between the conscious and the unconscious and is responsible for reality testing and a sense of personal identity.

Reality Principle

The concept in psychoanalytic theory that the mind functions to mediate between the demanding needs of the id and the external real world.