Put a piece of paper over textbook Figure 4.6 and trace the axes, budget constraint II, and

Question:

Put a piece of paper over textbook Figure 4.6 and trace the axes, budget constraint II, and both indifference curves. Now consider what happens when the price of stuff increases from 1 to 100/99 (about 1.1). Where does this new budget constraint intersect each axis? Now draw this new budget constraint on your diagram. Draw a new indifference curve on your figure that is tangent to your new budget constraint. It will be in between the two existing indifference curves on your diagram. Given the information at hand, any indifference curve you draw that follows the rules (slopes down, doesn't cross, is crescent shaped) is an acceptable answer. Now use your figure to find two points on the demand curve for stuff.