2.1† Suppose the only two goods in the world are marmalade and jam.

A. You have no exogenous income, but you do own 6 jars of marmalade and 2 jars of jam. The price of marmalade is €4 per jar, and the price of jam is €6 per jar.

a. On a graph with jars of marmalade on the horizontal and jars of jam on the vertical axis, illustrate your budget constraint.

b. How does your constraint change when the price of marmalade increases to €6? How does this change your opportunity cost of jam?

B. Consider the same economic circumstances described in 2.1A and use x1 to represent jars of marmalade and x2 to represent jars of jam.

a. Write down the equation representing the budget line and relate key components to your graph from 2.1A(a).

b. Change your equation for your budget line to reflect the change in economic circumstances described in 2.1A

(b) and show how this new equation relates to your graph in 2.1A(b).