2. Surette buys only orange juice and yoghurt.

a. In 2014, Surette earns €100, orange juice is priced at €2 a carton and yoghurt is priced at €4 a tub. Draw Surette’s budget constraint.

b. Now suppose that all prices increase by 10 per cent in 2015 and that Surette’s salary increases by 10 per cent as well. Draw Surette’s new budget constraint. How would Surette’s optimal combination of orange juice and yoghurt in 2015 compare to her optimal combination in 2014?