1) Jerry lives on milk and cereal. . He can spend all his income on either 40 units of milk or 30 units of cereal. The price of milk is $3 and the price of cereal is $4. Assume milk is X1 and cereal is X2.

a) Draw Jerry's budget line and clearly label its slope, vertical intercept, and horizontal intercept. Indicate Jerry's budget set:

b) Write down the equation corresponding to Jerry's budget line.

c) Suppose the price of milk has risen to $4 and the price of cereal remains the same. How much would Jerry's income have to rise so that he can afford all the consumption bundles that used to be affordable?