3.John Q. Public spends all of his income on gasoline and hot dogs. Draw his budget line under several conditions: a. His income is $100, and one gallon of gasoline and one hot dog each cost $2. b. His income is $150, and the two prices remain the same. c. His income is $100, hot dogs cost $2 each, and gasoline costs $2.50 per gallon.

Part 2

Draw some hypothetical indifference curves for John Q. Public on a diagram identical to the one you constructed for Test Yourself Question 1.

a. Approximately how much gasoline and how many hot dogs will Mr. Public buy?

b. How will these choices change if his income increases to $140? Is either good an inferior good?

c. How will these choices change if gasoline price rises to $3.00 per gallon?