Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 7

In the following figure, a consumer is initially in equilibrium at point C. The consumer's income is $400, and the budget line through point C is given by $400 = $100 X + $200 Y. When the consumer is given a $100 gift certificate that is good only at store X, she moves to a new equilibrium at point D.
a. Determine the prices of goods X and Y.
b. How many units of product Y could be purchased at point A?
c. How many units of product X could be purchased at point E?
d. How many units of product X could be purchased at point B?
e. How many units of product X could be purchased at point F?
f. Based on this consumer's preferences, rank bundles A , B , C , and D in order from most preferred to least preferred.
g. Is product X a normal or an inferior good?