2. The table below shows combinations of consumption of ice creams and chocolates that provides identical utility to a consumer. C. a. Draw the indifference curve using the consumption combination points given in the table. b. Compute the Marginal Rate of Substitution at the different points? Explain your answer. A consumer has a daily income of $120 and purchases two products ice creams and chocolates. The price of ice cream is $3 and the price of chocolates is $4. i. What is the maximum demand for ice-creams, if only ice creams are consumed? 11. What is the maximum demand for chocolates, if only chocolates are consumed? Draw the budget line. d. Which is the optimal consumption bundle choice of the consumer? e. Suppose the price of ice-creams decreases to $2 each, while price of chocolates remains the same at $4 and income remains the same. What will be the maximum demand for ice- creams and chocolates? 111. Combination Ice - MARGINAL crea Chocolates RATE OF SUBSTITUTION ms = A 7 40 B 10 30 15 20 D 20 15 E 30 10 F 40 8 3. The table below shows combinations of bananas and boxes of cereal that provide identical utility to Jones. Combination Bananas Boxes MARGINAL RATE OF of SUBSTITUTION Cereal A 1 15 B 3 9 C 5 6 D 7 4 E 9 3 a. Draw the indifference curve using the consumption combination points given in the table. b. Compute the Marginal Rate of Substitution at the different points? Explain your answer. c. Suppose that bananas are selling for $2 each, cereal costs $1.67 per box, and Jerry has $20 of income. 1. What is the maximum demand for bananas, if Jerry consumes only bananas? 11. What is the maximum demand for cereals, if Jerry consumes only cereals ? Draw the budget line. d. Which is the optimal consumption bundle choice of the consumer? e. Suppose the price of bananas changes to $1.5 each, cereal costs remains the same at $1.67 per box and Jerry's income remains the same. What will be the maximum demand for bananas and cereals? 111