Ann receives a monthly income of 900 Euro. She can consume salmon (good 1) at price p1 and buy books (good 2) at price p2. Her preferences are represented by the utility function ????(????1, ????2 ) = x1 + 10????2. The prices of both goods are p1 = 20 (Euro per kg salmon) und p2 = 10 (Euro per book). Solve this problem for optimal bundle and show your solution on the graph.
Suppose that now the government introduces a unit subsidy of 2 Euro for each book. Solve the new problem and show it on the same graph.
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