Herbert spends all the $50 of his paycheck on food and shelter which each cost $5 per unit.
1. Determine the equation of his budget line?
2. Draw the budget line and the two possible indifference curves that Herbert might have. One indifference curve should demonstrate the Herbert spending his entire budget but consuming too much shelter. Label that point on the graph A. The other indifference curve should demonstrate the Herbert optimizing his utility. Label the optimal point B.
3. Calculate the Herbert's marginal rate of substitution among food and the shelter when he is consuming his utility maximizing market basket?