A consumer gets utility from consuming commodities x1 and x2. The consumer's the Engel curve for...

Question

Question

A consumer gets utility from consuming commodities x1 and x2. The consumer's the Engel curve for x1 has a positive slope.

True or False: It is not possible to determine the slope of the Engel curve for x2.

Answer 1

Answer #1

Ans: True.

Explanation:

We have:

$Budget:P_{1}x_{1}+P_{2}x_{2}=M$

$\frac{dx_{1}}{dM}>0(given)$

So, we have:

$x_{2}=\frac{M-P_{1}x_{1}}{P_{2}}$

$\frac{dx_{2}}{M}=\frac{1-P_{1}(dx_{1}/dM)}{P_{2}}$

The sign of Engel curve of X2 depends on P1 which is required information.

Answer 2

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