Instruction: Graph the following.

1. Draw a budget line for Caramel, who has a monthly income of Php10,000.00. Assume that she buys burger steak and fries, and the burger steak costs Php1,000.00 per kilo and potatoes cost Php200.00 per kilo. Add an indifference curve for Caramel that is tangent to her budget line at the combination of 5 kilos of steak and 25 kilos of potatoes.

NOTE: Plot your steak along the X-axis

2. On the same graph you have earlier constructed, draw a new budget line for Caramel, if her monthly income falls to Php8,000.00.Assume that potatoes are inferior good to Caramel. Draw a new indifference curve tangent to her new budget constraint that reflects this inferiority. What will happen to Caramel's potato consumption? What will happen to her burger steak consumption?

3. Tulsa spends all her income on magazines and novels.Illustrate each of the following situations on a graph, with the quantity of magazines on the vertical axis and the quantity of novels on the horizontal axis. Use two budget lines and two indifference curves on each graph.

1. When the price of magazine rises, Tulsa buys fewer magazines and more novels.
2. When Tulsa's income rises, she buys more magazines and more novels.
3. When Tulsa's income rises, she buys more magazines and fewer novels.