(Solved): Use the Rosen-Robak model to rationalize the following differences between th ...

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Use the Rosen-Robak model to rationalize the following differences between the Vancouver and Toronto economies. Toronto's median dwelling value was $$\$420,000$$ and its median household after-tax income was $$\$68,000$$. Meanwhile Vancouver's median dwelling value was $$\$600,000$$ and its median household after-tax income was $$\$63,000$$. (a) Draw a graph with housing prices on the vertical and incomes on the horizontal axis and label points on this graph depicting Toronto and Vancouver. Then add an indifference curve and a unit cost curve that rationalize Toronto's outcome as a Rosen-Robak equilibrium. Label the indifference curve UT1 o and label the unit cost curve CT1. For full marks, ensure that one of these curves passes through both Vancouver's and Toronto's points on the graph. (b) Shift one of your curves from (a) to rationalize Vancouver's outcome. Label it either UV an or CV an depending on which curve shifts.