Jane buys only two goods: good 1 and good 2. Her preferences are complete,
reflexive, and transitive. Her preferences are also (strongly) monotonic. The price of
good 1 is $3 per unit, the price of good 2 is $2 per unit, and her income is $120.
(1) Graph the budget line and the budget set that she faces. (2 points)
(The horizontal axis measures the quantity of good 1.)
(2) Consider the following consumption bundles.
Consumption Bundle
Units of Good 1
Units of Good 2
A
20
30
B
10
55
C
40
20
D
30
45
E
20
20
F
10
45
An addtional information about Jane's preferences is that she is indifferent between
consumption bundle A and consumption bundle B. Find Jane's best affordable
consumption bundle (or her optimal consumption bundle) among the above consumption
bundles. Explain your answer. (4 points)