Winnie consumes cookies and milk but only in the fixed ratio of two boxes of cookies to three gallons of milk. At any other ratio, the excess goods are totally useless to her. The cost of a box of cookies is $4 and the cost of a gallon of milk is $2. Winnie has $36 to spend on milk and cookies. Let x1 be the number of boxes of cookies purchased and x2 be the number of gallons of milk purchased by Gladys. Let P1 be the price of a box of cookies and P2 be the price of a gallon of milk.
a) Draw 2 indifference curves which represent Winnie's preferences.
b) Graph Winnie's budget line. How many boxes of cookies and how many gallons of milk would Winnie purchase in this situation?
c) What is Winnie's demand function for milk?
d) Based on your answer in part (c), draw Winnie's Engel curve for milk in the graph below, assuming the cost of a box of cookies is $4 and the cost of a gallon of milk is $2.