Order Description
Assume that an individual has an income of $65,000, which is spent entirely on the consumption of good X and good Y, and the price of X is $45 and the price of Y is $60. Utilizing the given equations answer the following questions. (100 Points)
Calculate and graph the consumer?s optimal bundle and utility.
Assuming that the government imposes a subsidy of $10 per unit on X, calculate and graph the consumer?s new optimal bundle.
Using indifference curves and the compensated demand functions calculate and graph the CV and EV of the subsidy.
Derive the individuals, ordinary, compensated and equivalent demand curves, and calculate the EV, CV, and consumer surplus from the change in surpluses.
Using the ordinary demand curve, graphically show the deadweight loss and cost of the subsidy.
Finally, demonstrate graphically, the difference between what the consumer would have received from a lump sum transfer from the government compared with the subsidy received on consumption of X. Identify the excess burden of the subsidy.
note i want the solution for 3,4,5,6, and graph