Select the correct equation for budget constraint?
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Select the correct budget constraint if price of X is $4 and price of Y is $5 and income is $100.
a. Lauren is at the grocery store, where there is a sale on cereal. Cereal is only $1 per box, but next week it will be $2 per box. Lauren has $20 to spend on cereal in this two-week period. Show her cereal budget constraint and predict the point on the budget constraint that sheâll select.
b. Lauren is at the grocery store, where there is a sale on bananas. Bananas are only 25 cents per pound, but next week they will be 50 cents per pound. Lauren has $1 to spend on bananas in this two-week period. Show her banana budget constraint and predict the point on the budget constraint that sheâll select. Explain why this is likely to differ from the point that she selected on her cereal budget constraint.
At the consumer's optimum:
the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
it is still possible for the consumer to increase his consumption of both goods.
the budget constraint will have a slope of MUx/Px.
the slope of the indifference curve is equal to the slope of the budget constraint.