00:01
Consider a student with a budget of £100 to spend on cakes and books.
00:08
The price of the book is $10 and the price of the cake is $5.
00:20
So write, sorry, the price of the book is £10 and the price of the cake is £5.
00:28
Write an equation of the budget line and draw it.
00:33
And we're also to think about the student's preferences if cakes and books are neither perfect compliments nor perfect substitutes.
00:41
Think about how the indifference curve could be and draw them.
00:44
What points should the student choose? and we're also to find the marginal rate of substitution and what would it be if the income is £150.
00:54
So let's start with the first of the question.
00:57
So we know that m is 100.
01:00
We'll let x be the number of books and y would be the number of cakes.
01:06
So p of x is equal to 10.
01:16
The p of y is equal to 5.
01:18
So the budget equation would be px multiplied by x plus py multiplied by y and this is less than or equal to m.
01:30
And m is 100.
01:32
So 10x plus 5y less than or equal to 100.
01:36
And indifference curve should look like this.
01:41
The quantity would be right here.
01:42
The quantity of y and the quantity of x.
02:01
And they should look something like this.
02:03
And the mark will go right here.
02:06
And this would be bl1.
02:12
This is point a 5, 10.
02:16
And this is what the indifference curve should look like.
02:20
For the second part of the question...