Problem 3: Constraint optimization - Graphical and verbal

Good X sells for 100 kr., and good Y sells for 50 kr. At your current level of consumption, your marginal rate of substitution between X and Y is 4.

1. Assuming that you purchase both X and Y, draw an indifference curve and budget constraint that reflects the facts given above. (Hint: You will have to choose an initial income level and an initial bundle of X and Y.)
2. Are you maximizing your utility?
3. If you are not maximizing your utility, are you buying too much X or too much Y?Explain.
4. Now assume that MRS is always larger than 2. What would be a corner solution supported by the facts above? Show graphically.