Question 4-Consumer Problem
a. Draw the budget line below if W = 50 Px = 2 and Py = 10. Explain in your own words what the
Budget Line is and shows you. Make sure to define affordable space, what the slope is (with
interpretation), what the Qx and Qy axis are (along with max purchase points), and define the
budget constraint mathematically.
Is the consumption bundle of x = 27 and y = 4 affordable? Explain. Plot it in your budget line
above.
b. Label the graph below and show where you would be (in the graph ? pt A, B or C) if you
were told that MUx = 60 MUy = 45 Px = 2 and Py = 3. Explain how you know and tell me what
the consumer should do at this point? Why?