A consumer has $100 of income to spend on books and other goods (a composite good).Books cost $20 each and the consumer's optimal bundle is to consume purchase three books while spending the rest of the income on the composite good.The consumer is then given a gift of a book.Assume the consumer is unable to sell the book.Use two separate graphs to demonstrate each of the two possible scenarios:
i.A consumer that is indifferent between the book gift and a cash gift of $20.
ii.A consumer that strictly prefers a $20 cash gift to a book.
To get full credit,accompany each graph with a brief explanation and draw your graphs clearly and well labeled.

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The Answer of A consumer has $100 of income to spend on books and other goods (a composite good).Books cost $20 each and the consumer's optimal bundle is to consume purchase three books while spending the rest of the income on the composite good.The consumer is then given a gift of a book.Assume the consumer is unable to sell the book.Use two separate graphs to demonstrate each of the two possible scenarios:
i.A consumer that is indifferent between the book gift and a cash gift of $20.
ii.A consumer that strictly prefers a $20 cash gift to a book.
To get full credit,accompany each graph with a brief explanation and draw your graphs clearly and well labeled.

A Consumer Has $100 of Income to Spend on Books