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    Using the Demand Curve and the Utility-Maximizung Rule

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    Given the following information, describe the budget line for the consumer. Be sure to label the axis and provide a number for the vertical and horizontal intercepts. State the slope and its meaning.

    Income =$1000/ month
    Price of 1 pound of steak = $4.00
    Price of 1 pound of potatoes = $0.50

    Now, overlay several indifference curves onto the picture. What are these curves? What is their shape? How can you find the utility-maximaiztion point?

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    Solution Preview

    Please see the attached file for the full solution.

    If x represents the pounds of steak and y represents the pounds of potatoes, then the budget line is given as:
    4x + 0.5y = ...

    Solution Summary

    This solution describes the budget line for a consumer and overlays several indifference curves on the line.