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2. Suppose there are only two goods: bread (G1) and wine (Gz). In 2006, the consumer had an income of $100. In 2007, the consumer

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2. Suppose there are only two goods: bread (G1) and wine (Gz). In 2006, the consumer had an income of $100. In 2007, the consumer again has an income of $100, but the absolute prices of bread and wine have risen. The consumer's budget lines and his optima for two years are shown in the diagram below. wine 50 20 2007 2006 25 40 bread (1) Use the above information, calculate the absolute prices of bread and wine for the years 2006 and 2007. (SHOW YOUR WORK) 2006: Pbread = Pwine 2007: Pbread Pwine= (2) What are the slopes are of two budget lines (Please use the price ratios to calculate it.)? 2006 IPR = 2007 IPR = (3) Can you mathematically express the two BLs? Please use G, to represent the quantity of bread and Go to represent the quantity of wine 2006 2007 2

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