1)A consumer has a current income of $800, which can be spent only on goods X and Y. The price of good X is $25, and the price of good Y is $8.

a.[2 points] Write down the equation of the budget line and graph the consumer's budget constraint (clearly labeling the intercepts and the slope of the budget line).

a.[2 points] Suppose that the consumer chooses to purchase 50 units of good Y. On the same graph, show the consumer's utility-maximizing bundle (quantities of X and Y) and the indifference curve through this point.

b.[2 points] Clearly explain what you know about how this consumer values good X compared to good Y (on the margin).

c.[4 points] Now the price of good Y increases to $12.50. If X is an inferior good and Y is a normal good, show what the new utility-maximizing bundle might look like on the graph above (including the new budget line and the indifference curve through this new point), and explain your reasoning.[You don't have enough information to determine the exact bundle, but youcandetermine whether consumption of each good increases or decreases.]