Jonathan consumes two goods, steak and instant ramen noodles

| November 24, 2016

Microsoft Word – Problem Set #3.docx
Jonathan consumes two goods, steak and instant ramen noodles. When Jonathan has less than $100, instant ramen noodles are a normal good. However, when Jonathan has more than $100, instant ramen noodles are an inferior good.
Show the situation on a graph using budget lines and indifference curves.
Derive Jonathan’s Engel curve for instant ramen noodles.
If the price of instant ramen noodles increases, show the income and substitution effects on a graph.

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