1. Kyle eats two types of fruits - bananas and apples. He has a budget of $50 to spend on fruits per month. The price of bananas is $5 and that of apples is $10.

a.Graph Kyle's budget line by plotting bananas on the horizontal axis, and find the slope of his budget line.

b.Write down the budget equation for Kyle's consumption of fruits (bananas on the horizontal axis).

c.Suppose the price of bananas has doubled. Present this effect graphically and find his new slope of the new budget line (bananas on the horizontal axis).

Suppose Kyle now reduces the budget spent on fruits to $40. Present this effect graphically and find his new slope of the new budget line (bananas on the horizontal axis, and price of bananas is $5 and that of apples is $10).

1. Think about a purchase that you made recently. How would you describe your thinking before you made that purchase?

3. Would you expect total utility to rise or fall with additional consumption of a good? Why?