You arrive on campus at the beginning of the academic year with $450 to spend on textbooks and food. The price of a textbook is uniformly $90 and the price of a meal is always $15. Your parents made a deal with you: if you spend $270 of your own money on textbooks, your parents will split the cost of any additional textbooks with you.
a. Draw your budget constraint. Label the y- and x- intercepts. (Put food on x-axis.)
b. At what point does your budget constraint "kink"? What is the slope of the budget constraint to the left and right of the kink point?
c. Draw an indifference map showing that with your parents' subsidy, you buys 5 books and 6 meals, but that without the subsidy, you would have purchased 4 textbooks and 6 meals.