Question: 1. Suppose that you are consider the tradeoff between purchasing a certain amount of food and a certain amount of shelter. a. Draw a graph

1. Suppose that you are consider the tradeoff between purchasing a certain amount of food and a certain amount of shelter.

a. Draw a graph with "food" on the x-axis and "shelter" on the y-axis.

b. Your budget allows you to purchase (using all of you income) 10 units food and 100 units of shelter, or 25 units of food and 90 units of shelter. Plot these points on the graph and sketch your budget line.

c. Calculate the ratio of the price of food to the price of shelter.

d. Assume that the price of one unit of food is $10. Write the equation for your budget line. e. Find the x-intercept and the y-intercept. Interpret what these points represent.

2. Calculate the opportunity cost of one shelter unit in terms of food. Explain how you got this answer.

3. Suppose your income increased. What would this do to your budget line? Sketch this change

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