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.

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

The solution answers the question below related to indifference curves and budget line. The question is specfic and the answer provided is also specific to the question.

See the attached diagram. A consumer is in equilibrium at point A. The price of good X is $5.
a) What is the price of good Y?
b) What is the consumer's income?
c) At point A, how many units of good X does the consumer purchase?

Budget Constraints
What is a budget constraint? How does a budget constraint explain consumer choices when used in conjunction with indifferencecurves? Explain what happens if a household looses half of their income, using a budget constraint andindifferencecurves in your discussion.

1. Using Indifference Curve andBudget Line analysis, graphically demonstrate the equilibrium of a consumer who is maximizing utility. Briefly explain.
2. Using Indifference Curve andBudget Line analysis, graphically demonstrate how you can derive a demand curve. Briefly explain.
Note: In the above questions, assume a bun

10. The consumer's utility function is U=4 square root of X1 + X2. This means that the MRS at the bundle (x1, x2) is 2/square root of X1. Show that the individual's indifferencecurves have the diminishing MRS property.

Attached are 2 utility functions that I'm having trouble with.
Problem 3
For each of the following utility functions, draw indifferencecurves for utility level 12 and 16. Indicate three bundles on each of these indifferencecurves by specifying the coordinates of each bundle. Shade the weakly preferred set of bundles you

5. Use consumer theory (i.e. indifference curves and budget constraints), where the usual assumptions apply, to illustrate the following:
Assume the individualĂ˘??s utility is an increasing function of medical goods (m) and all other goods (X). That is,
Utility =U (m,x) where delta u/delta m >0, delta u/delta x >0 , and

2 questions:
1. Martha's income is $40k/year. She can spend it on health care visits at $80/visit, or on groceries (standing for all other goods), which costs $100/bag of groceries. draw Martha's budget constraint. Using indifferencecurves show martha's optimum if she buys 300 bags of groceries per year.
2. Suppose M

The task is to use indifferencecurvesandbudget constraints to determine which of these two programs to chose. You are to assume that income is equal to $400 per month to spend on long-distance phone service and all other good (D) and that the utility function is U=mD. For each program, calculate the values of m and D that max

Supposedly, indifference theory can explain all rational choices and behavior. Try the theory out on this situation. Suppose the only consideration for couples to have a baby or not was money. If a baby costs $5,000 a year, the price of "All other goods" is $1, and the couple has an annual income of $40,000:
a.Construct th