Question 1 {8 marks} 1.1 Given that Y.Pv + X.Px = N1, show that the slope of the budget line can be presented as lePv.what is the formula of the intercept of the budget line ? [3] 1.2 if M = 1000, P1 = 20 and Pi; = 40, which of the following combinations are feasible combinations? {a} X = 40, Y = 10, {b} X = 30-, Y = 10, {c} X = 20, Y = 15. [3] 1.3 What is the MRT in the previous question ? How do you interpret it? [2] Question 2 {16 marks} You are provided with the following information :M = R1000 , P: 2 R100 and Pig = R125 .At the outset , the consumer purchases 5 units of X. Subsequently ,the price of Y decreases to R80 per unit. Answer the following questions 2.1 Draw the initial point of equilibrium on a diagram , showing the budget line and the indifference curve . [3] 2.2 How many units of product Y will be purchased at the initial equilibrium ? [1] 2.3 indicate the new budget line on the same set of axes as drawn in part 2.1 . Draw the new indifference curve such that the new equilibrium is where the consumer purchases 6 units of X. [2] 2.4 At the new position of equilibrium , how mam}r units of product Y witl be consumed ? [1] 2.5 Using the diagram used previously ,show and explain how the increase in the consumption of product X can be broken into an income and substitution effect . [4] 2.5 Using the same diagram ,show how the change in the consumption of product Y can atso be broken into an income effect and a substitution effect . [3] 2.? For product X, the substitution effect resulted in a decrease in its consumption ,while for product Y the substitution effect resulted in an increase in its consumption .why is this the case ? [2]