Answer to Question #142078 in Microeconomics for fredrick

Question

suppose eve allocates $3000 of her monthly income to the purchase of cheese cakes and soda of which she receives a marginal utility of 1200 for cheese cake and 400 for soda

illustrate eves budget lines when the price of cheese cake increases by $100

Answer 1

because of increase in price of cheese cakes, the budget line will move inwards.. (changes from budget line 1 to budget line 2).