1. Originally Px = $120 and Py = $80. True or
False: If Px increases by $18 and Py increase by $12, the new
budget constraint will be shifted inward and parallel to the old
budget constraint. Explain.
2. Sue consumes only two goods, food, and clothing. At her
current consumption bundle, the marginal utility of clothing is 9
and the marginal utility of food is 12. The price of clothing
is $0.90 per unit and the price of food is $1.20 per unit. Is
Sue maximizing her utility? Explain.