Answer to Question #190193 in Microeconomics for Tayyaba

Question

Draw an indifference curve associated with this bundle, and explain how its slope at the equilibrium point relates to the slope of the budget line.

Answer 1

full question is

(I got on web)

1. Suppose a consumer has income of 10, and buys soda pop and movies. The price of each good is 1.

---Suppose that in consumer equilibrium this individual consumes 7 soda pops and 3 movies. What rules must hold in consumer equilibrium? Label this bundle in your drawing (call it point “A”). Draw an indifference curve associated with this bundle, and explain how its slope at the equilibrium point relates to the slope of the budget line. 

---Now suppose that income goes up to 15. Illustrate how the budget constraint will change. If both goods are normal, explain where the new equilibrium will be (your answer might consist of a region of bundles, rather than just one bundle).

Answer is--

the graphical solution and explanation