Problem 6 Buying and Selling Dave is initially endowed with 20 apples and 20 oranges3 w : (20, 20). Let 3:1 represent the consumption of apples and $2 represent the consumption of oranges. a) Assume p1 = 132 2 2. Write down Dave's budget constraint, and plot budget constraint in the graph. Mark all bundles on budget line for which Dave is selling apples and is buying oranges. b) Suppose U ($1,272) : $1352. Find indifference curve that passes though endow- ment point analytically and nd its slope (MRS) at the endowment point. Depict the curve and the slope in the graph. c) Assume p2 = 2 and nd optimal choices of Dave under three scenarios: p1 : 1, p1 = 2 and p1 = 3. Determine net demands of Dave for apples and oranges. d) Is Dave buying or selling apples on the market under the three scenarios? Explain why he is using such trading strategy by comparing MRS at the endowment point with relative price. e) Connect the three optima] bundles to obtain price offer curve and plot it on a graph with indifference curve passing though endowment point. Is your price offer curve located above the indifference curve