Given the income equation: $150 = ($10 x Juice) + ($5 x Bread) and the utility function: U = (J.75 B.25)
a) Place Juice on x axis and Bread on y axis. Find both intercept points and solve for and graph a budget constraint for the two goods. What is the slope?
b) A friend of yours suggests that he will consume 6 units of Juice and 15 Units of Bread. What is wrong with this?
c) Define an indifference curve. What slop does it have? Why does this slope change and why is the curve bowed?
d) Calculate the indifference curve at the optimal levels of B and J and place on a graph. What exactly is going on at this point?
e) Using the numbers above, find the "consumer equilibrium condition or rule" and explain.