Carmen consumes nothing but caleteria meals and CDs Her indi

Carmen consumes nothing but caleteria meals and CDs Her indilterence curves eshibn the our g uperties of indiflerence curves Cafeteria mealsco 5 cach, and CDs cost 510 Carmen has $50 to spend a Draw Carmen\'s budget line and an indiflerence curve that illustrates her optimal consumption dle. Place caleseria meals on the horizontal axi and CDs on the vertical axis. You do not have enough information to know the specific tangency p choose one arbitrarils b. Now Carmen\'s income rises to $100 Draw her e hudgzt line on the samie diagram, as well as an budget line on the sare diagram, as well as an indifference ainethal illustrainter optimal sumption bundle Asaurseiharrafeteria men! an inferior gnod leteria eals and CDs are both i

Solution

Budget line equation: 5M + 10C =50

M = cafeteria meals

C = CDs

b) If income rises, budget line will shift parallel outwards.

If cafetria meal is considered inferior then indifference curve will be where cafetria meal is consumed less and CDs are consumed more.