Consider Eleanor, a Barnard junior, who purchases soda (S) and tennis balls (T).
a. Assume that the following bundles are all on her budget line. For each bundle, tell if Eleanor is at an optimal point. If not, does she prefer a market basket on the budget line with more soda or more tennis balls? Explain why in detail using the concept of marginal utility per dollar. Draw a budget line and indifference curves, and mark and label points A, B and C to show where Eleanor would be if each were true.
i. MRS = 5, PS/PT = 3
ii. MRS = 2, PS/PT = 3
iii. MRS = 3, PS/PT = 3
b. Interpret the slope of the budget line in words.