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6. Consider an individual whose income is $100. She consumes two goods, it and 3*. Price of}: {PX} is $2. Price of}; [Pr] is $5. {a} Draw the budget line for this individual. You should indicate the values of the intercepts on the yaais and aajtis. {b} Using indifference curves and the diagram in [a], indicate the consumer's utility-maximization point {the indifference curves are smooth and convex}. Note: For this question, you don't need to identify numericallyr the maximization point] {e} Define in this case marginal rate of' substitution {MRS} as ve'x. Calculate the MRS at the utitiwma'rrmrsarfon point in {b}. (d) blow, price of' it rises to $2.5 and price of 3* falls to $4. Draw the new budget line in the same diagram in (a). {e} Suppose the utilitymaximization point in {b} coincides with the intersection point of the old and new budget lines. Calculate the values of a and v at the intersection point. {I} With the aid of a diagram1 predicts the movements of x and 3; after the pricechanges in {d}, given {e}Step by Step Solution
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