# Assume that a consumer has a budget of $45 to allocate over two products, milk (M) and ## Question: Assume that a consumer has a budget of$45 to allocate over two products, milk (M) and bread (B). The price of milk is PM = $4:50 and the price of bread is PB =$5:50.

1(a): Draw a graph of the budget constraint, assuming that the quantity of milk (QM) is on the horizontal axis. 1(b): Include on your budget constraint the following four allocations (and clearly identify the quantities of both products implied by each point):

1. Point A: when the consumer chooses to consume 4 units of milk

2. Point B: when the consumer chooses to consume 3.27 units of bread

3. Point C: the maximum amount of milk purchasable with $45 4. Point D: when the consumer chooses to spend$30 on milk 1(c): On another graph, draw two budget constraints: the old constraint (from the previous questions) and a second constraint, when the price of bread increases to (PB2 = $6:00). (Do not demarcate the points of question 1(b), but indicate the maximum quantities of each product purchasable with$45 at the new set of prices.)

Fantastic news! We've Found the answer you've been seeking!