Qiqi lives in Vancouver and last year she brought a $200,000 condominium, Her total wealth just before buying the condo was $400,000. Let the size of her condo corresponds to one unit of shelter. (a) Assuming a composite good Y of unit price. What was Qiqi’s budget constraint last year in Y and shelter S? (b) Suppose that this year the market price of condos has doubled from last year. What is Qiqi’s budget constraint this year? (Ignore transaction
costs and taxation e?ects of buying and selling condos.) (c) Is Qiqi better o? or worse o? this year? Explain with the aid of a diagram.
