A consumer has income of $500. chips costs $2 , and burger costs $6 .
(a) Draw his budget constraint (put burger on the horizontal axis). What is the slope of her budget constraint?
(b) Draw Consumer’s indifference curves for chips and burger if you love chips better than the burger. Draw 4 indifference curve and use this graph to describe and explain the three properties of the indifference curves.
(c) Given the prices of burger and chips, what would be the marginal rate of substitution at the point that corresponds to the optimal consumption choice? What does the marginal rate of substitution tell us?