Andrew, Barbara, and Carlos got lucky.They have a rich uncle who senteach of thema $100 gift certificate for dinners at the Full or Fancy Restaurant.Full or Fancy offers just two dinner choices: the Plate Loader (PL) for $5 per meal or the Deluxe Meal (DM) for $20 per meal.

1.(10%) Draw the gift certificate budget line for the two restaurant offerings, placing the Plate Loader (PL) on the vertical axis.Be sure to label both axes, including units of measure.

2.(60%) On separate graphs, one each Andrew, Barbara, and Carlos, drawthe budget lineplustwo indifference curves that illustrate their preferences, using the utility functions below.Let one indifference curve touch the point of Consumer Equilibrium.(Remember that an indifference curve connects all points where the person's utility is the same.)

a.Andrew likes food, and he doesn't care how it's prepared.

b.Barbara believes in balance.She insists on have equal numbers of servings of each option.

c.Carlos is willing to make tradeoffs, even though he likes both types of meals.(Although this curve may look complicated, the key point is that its curvature is symmetric, so the curve will be balanced between the two meals.)

(Hint: Since an indifference curve is based on holding U constant, you can make indifference curves from this utility function by rearranging terms to putx_PLon the left-hand side, resulting in the function below.Try plugging in values forx_DMof 1, 2, 2.5, 3 and 4, first forU_C= 15,U_C= 20 and forU_C= 25.)

3.(30%) What combinations of meals will put each person at their Consumer Equilibrium and make them happiest in using up their gift certificates?(Hint: Remember that CE is where the slope of the budget constraint equals MRS)

a.Andrew,

b.Barbara,

c.Carlos (x_PLx_DMcan be in decimals as well here).