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Consider the following situation. A student's weekly budget is 100 pounds. The student can spend their money on either clubbing or eating at a fast-food
Consider the following situation. A student's weekly budget is 100 pounds. The student can spend their money on either clubbing or eating at a fast-food restaurant. Each meal at the fast-food costs 5 pounds and each night in the club is 20 pounds. Answer each of the following questions. 1. Draw the budget line ofthe student, where the number of meals at the fast-food restaurant is on the X- axis and the number of nights clubbing is on the Y-axis. 2. What is the slope of the budget line? 3. Show in your diagram where the optimal consumption of the student is, by drawing the indifference curve passing through the optimal point. 4. What is the slope of the indifference curve you drew at the point of optimal consumption? Suppose that the student actually consumes at point A depicted in the diagram below: Suppose that the student actually consumes at point A depicted in the diagram below: clubbing 5 20 Fast-food meals 5. Is the student consuming optimally? If not, why? 6. Can you suggest to the student a better consumption bundle? Will that bundle involve consuming more or less fast-food
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