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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.
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