a. Draw a budget line for Rafaella, who has a weekly income of $30. Assume that she

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a. Draw a budget line for Rafaella, who has a weekly income of $30. Assume that she buys chicken and eggs, and that chicken costs $5 per pound while eggs cost $1 each. Add an indifference curve for Rafaella that is tangent to her budget line at the combination of 4 pounds of chicken and 10 eggs.

b. Draw a new budget line for Rafaella, if the price of chicken falls to $3 per pound. Assume that Rafaella views chicken and eggs as substitutes. What will happen to her chicken consumption? What will happen to her egg consumption?

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Macroeconomics Principles and Applications

ISBN: 978-1133265238

5th edition

Authors: Robert e. hall, marc Lieberman

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