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2. (12pts) Consumer Choice: a) (6pts) Marco consumes only bananas and t-shirts. .At his current consumption bundle, he is spending all his income and his
2. (12pts) Consumer Choice: a) (6pts) Marco consumes only bananas and t-shirts. .At his current consumption bundle, he is spending all his income and his marginal utility from the last banana he consumed is 5 utils and from his last t-shirt is 20 utils. Each banana costs $2 and each t-shirt costs $10. Is Marco maximizing his utility? Explain. Draw a graph of the consumer choice model for Marco showing his current utility level and whether he can improve his situation. (Place Bananas on the x-axis) b) (6pts) Using the budget constraint and optimum as the graph above, now using the graph below show what happens when the price of bananas falls to $1 and assume that Bananas are inferior goods for Marco. Show the substitution and income effects
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