Indifference Curve and Budget Line (8%)
Annie has an income of $180 an hour. Popcorn costs $6 a bag, and costs $4 a six-pack cola
a. Draw a graph of Annie’s budget line with six-pack of
cola on the x-axis
, and
popcorn on the y-axis
. (2%)
b. What is the slope of Annie’s budget line (1%)? What could this slope be also called? (2%)
c. If we know that Annie maximizes her utility with the purchase of 12 bags of popcorn, how many six-pack cola she will purchase?-(an estimate from a graph) (1%), draw an indifference curve reflecting this optimum. (2%)
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