The price of a CD (C) is $10 and the price of a sandwich is $2. Philip has $100 to spend on the two goods. Suppose that Philip's utility function is given by ( ) ( )
a. Draw the indifference curve corresponding to the utility level of 1000. Place the number of units of CDs on the horizontal axis.
b. Find Philip's optimal basket. What is the level of utility associated with the optimal basket? Show the optimal basket by drawing the budget line and the indifference curve containing the optimal basket.
c. Suppose the price of CD goes down to $5. Repeat part b.
d. Find Philip's demand for sandwich as a function of income (I), price of sandwich (Ps), and price of CD (Pc).