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Mr. Squeaky Clean consumes bottles of shampoo and tubes of toothpaste. Assume that the price of a bottle of shampoo is held constant at $4.
Mr. Squeaky Clean consumes bottles of shampoo and tubes of toothpaste. Assume that the price of a bottle of shampoo is held constant at $4. In the diagram below, Squeaky initially optimizes his utility at the tangency between indifference curve 1 (IDC1) and budget constraint 1 (BC1), point A. After a change in market conditions, he re-optimizes at point B on budget constraint 2 (BC2).Relative to the constant price of shampoo at $4 per unit, BC1 is Squeaky's budget constraint when the price of a tube of toothpaste is 16 . BC2 is his budget constraint when the price of a tube of toothpaste is 32 .Based on the above information and assuming that demand is linear, derive and plot Mr. Squeaky Clean's demand function for toothpaste, using the price and quantity values found in Part 1 as endpoints. Please note, your plotted demand function will not necessarily hit the vertical axis or horizontal axis. (Use the straight-line tool to plot two points and thus the demand curve.)
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