Rumi has $100 and is deciding how to spend it on bread and wine. The price of bread is $2 and the price of wine is $2. (Both goods are infinitely divisible.)

Write down the budget constraint in terms of1+2= , where1is quantity of bread and2is quantity of wine. (Since this is a linear equation, you could scale , , andby an arbitrary scalar. In this and subsequent questions, just letbe the total budget in dollars.)

Suppose the government wants consumers to conserve bread, so it increases the price of bread to $4 for each additional loaf over 25 loaves. In other words, 26 loaves of bread will cost a consumer225+14=$54 .

Draw the budget constraint. What is the area under the new budget constraint?

(Note: We don't ascribe any intuitive meaning to this value. It is just a way to check that you have constructed the constraint correctly.)