Problem 2. (Murphy's budget set) Murphy spends his total monthly income of $100 on two commodities: french fries and beef jerky. The price of a portion of french fries is $2 and beef jerky is $5 (per pack). a) Write down Murphy's budget constraint. b) Find the maximal consumption of french fries (this number is called a real income in terms of french fries) c) Find the maximal number of packs of beef jerky possibly consumed by Murphy (a real income in terms of beef jerky) d) In a two-dimensional coordinate system, in which beef jerky is measured on the vertical axis and french fries on the horizontal one, draw a red budget line. Using pencil, show all the bundles that are affordable (the budget set). Where can we find the quantities you found in a) and b) on the graph? e) What is the slope of the budget line? How would you interpret it? f) Because of the Mad Cow Disease, the price of beef jerky increases to $10 (due to the smaller supply of beef). On a separate graph, plot show how the Murphy's budget set is affected? Is the shift parallel? What is the new relative price of french fries in terms beef jerky? g) Because of severe shortages in the supply of beef, a "Jerky" Bill is passed by US Congress, allowing each consumer to purchase at most 5 packs. Show on the graph how the new legislation affects Murphy's budget set