Budget Constraint Graphing?
•(a)Graph the budget line in (X1, X2)-space, and please label the axes, intercepts and slope of the budget line, and opportunity set.
•(b)Why do we search along the budget line, instead of throughout the whole opportunity set, for the optimal bundle?
•(c)Suppose the the price of X2 falls top′2= $5. How does the picture from part(a) change?
•(d)Suppose that income falls to Y= $75 (and we still have that the new p′2= 5 from part(c)). How does the picture from part(c) change?