# Indifference Curves and budget lines

Given the following information, DESCRIBE the budget line for the consumer: Be sure to state what the axes are and provide numbers for the vertical and horizontal intercepts. Also what is the slope of the line? Explain what the budget line represents.

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. Describe the shape of these curves -- why are they that shape. How can you find the utility-maximization point. Describe why other points on some indifference curves do not represent utility-maximization. NOTE: You are not required to submit graphs as part of any answer. You can explain any relationship that are contained in almost every graph.

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#### Solution Preview

Total Income = 1000

Steak = $4

Potato=$0.50

Budget Line:

1000 = 4Steak + 0.5Potatoes

X axis will represent the number of pounds of Steak

Y axis will represent the number of pounds of potatoes

So if we assume pounds of steak to be X and pounds of potatoes to be Y, we get

1000 = 4x ...

#### Solution Summary

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