Suppose the demand for a good, Good X, is defined as follows: Qdx=6000-1/3PX-PY+5PZ+1/5M
Assuming that the consumer has an income of $30,000 to purchase Good X and 2 other goods, PY for $1000 per unit, and PZ for $100 per unit:
If the budget function can be written as $30000 = QYPy + QZPZ :
(1)Use the prices above to derivethe budget constraint for the consumption of the two goods, Goods Y and Z, and show the optimal point of consumption for which the consumer will be indifferent to the consumption of the two goods.
(2)Imagine that the consumer utilizes a $100-coupon that you have offered as a manager to promote the sale of Good Y. Show and explain why and how the coupon will alter the constraint and consumption of Good Y.