We wish to model a consumer's choice between a product (call it good X) at different prices, and the composite good, priced at $1 per unit.

A.Suppose a consumer has a weekly disposable income of $1,200 and the price of good X is initially $2.00 per unit. Draw up a budget constraint showing this consumer's weekly feasible set. Put good X on the horizontal axis and the composite good on the vertical axis.

B.If this consumer has a Marginal Rate of Substitution (MRS) of Y/2X, what is the optimal consumption bundle of good X (in units) and composite good (in dollars) in this bundle? Show this bundle on your diagram from (a) with a stylized version of the indifference curve*

C.Suppose the price of good X increases to $2.50 per unit. What is the new optimal consumption bundle for this consumer? Show the new budget constraint and this new optimal bundle on your diagram from (a) with the aid of a stylized indifference curve

F.On a separate diagram, draw the consumer's demand curve for good X, for the two prices you can see, show working.