1. [30 Points] Suppose that a consumer enjoys two goods, X and Y. The market prices for the two goods are respectively PX and Py, and she has a xed money-income M that she can use to purchase goods. (a) [4 Points] Write down the equation of the budget line and determine its slope and vertical intercept (assume that good X is on the horizontal axis and good Y is on the vertical axis). (b) [4 Points] In a graph with good X on the horizontal axis and good Y on the vertical axis, show what happens when the price of good X goes up (everything else remaining the same). (c) [4 Points] Suppose now that, instead of having a xed income M, the consumer has endowments of goods X and Y of respectively to); and my. She can sell each of these units of good Y at price P,, and use the proceeds to buy good X, which has a price of Pm, and viceversa. Write down the equation of the budget line and determine its slope and vertical intercept (assume that good X on the horizontal axis and good Y on the vertical axis). (d) [4 Points] In a graph with good X on the horizontal axis and good Y on the vertical axis, show what happens when the price of good X goes up (everything else remaining the same). (e) [4 Points] Is the effect of the change in the price of good X on the budget set different depending on whether we assume that the consumer has a xed money-income or an endowment income? If yes, explain why? (f) [10 Points] Suppose that the consumer has the simple CobbDouglas utility function Mm, y) = x0'25y0'75. Moreover, assume that PX = $1, Py = $2, wX = 100 and my = 200. What are her gross demands for X and for Y? What are her net demands