Carmen consumes nothing but cafeteria meals and CDs. Her indifference curves exhibit the four general properties of indifference curves. Cafeteria meals cost $5 each, and CDs cost $10. Carmen has $50 to spend.
a. Draw Carmen's budget line and an indifference curve that illustrates her optimal consumption bundle. Place cafeteria meals on the horizontal axis and CDs on the vertical axis. You do not have enough information to know the specific tangency point, so choose one arbitrarily.
b. Now Carmen's income rises to $100. Draw her new budget line on the same diagram, as well as an indifference curve that illustrates her optimal consumption bundle. Assume that cafeteria meals are an inferior good.
c. Can you draw an indifference curve showing that cafeteria meals and CDs are both inferior goods?