Re: isi

Posted by Amit Goyal on May 06, 2012; 3:31pm
URL: http://discussion-forum.276.s1.nabble.com/isi-tp7529125p7532586.html

The answer is (b) (p-q).x0=C never holds. If you plot the budget constraint min{px + y, qx + C + y} <= I (assuming price of y is 1). Its going to be kinked and will have a budget boundary that is convex to the origin. If you choose x0 at the kink then (p-q).x0 = C will hold. But if the ICs are smooth and convex this possibility is ruled out.