A consumer buys good X and good Y(composite good). Price of X is 1 and Price of Y is 0.1. Total budget for X and Y is 2.
Show graphically the effect of a buy one get one free promo for X. Include explanation.© BrainMass Inc. brainmass.com August 19, 2018, 3:17 am ad1c9bdddf
Please see the attached file.
Total budget = Px * X + Py * Y
2 = X + 0.1Y or:
Y = 20 - 10X
So the initial budget is line AD.
But when there is buy one get one ...
The budget constraints for composite goods are determined.