Inayah is a rational consumer who consumes milk and cookies only from her monthly income of Rs. 1,500. If the price of milk is Rs. 500 per liter and the price of one pack of cookie is Rs. 300, answer the following questions: Given the information above write the equation of the budget line and illustrate the same through the two-dimensional labeled diagram. If Inayah spends all of her income on consuming one good, find: how much cookies she could afford?how much milk she could consume?Identify the impact of an increase in the income from Rs. 1,500 to Rs. 1,800 on Inayah’s consumption level. Also illustrate it using the two-dimensional labeled diagram. Assume that Inayah’s consumption of milk and cookies give her following level of utility:QuantityMU milkMU cookies14004502350200320015041001005706063030700Find the optimal level of consumption.Find the consumer equilibrium using the two-dimensional labeled diagram. please solve part 4 (1) and (2).

Equilibrium condition is when the Marginal utility per Rupee value is the same across all goods.

Answered: Assume that Inayah’s consumption of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Inayah is a rational consumer who consumes milk and cookies only from her monthly income of Rs. 1,500. If the price of milk is Rs. 500 per liter and the price of one pack of cookie is Rs. 300, answer the following questions:

Given the information above write the equation of the budget line and illustrate the same through the two-dimensional labeled diagram.
If Inayah spends all of her income on consuming one good, find:
1. how much cookies she could afford?
2. how much milk she could consume?
Identify the impact of an increase in the income from Rs. 1,500 to Rs. 1,800 on Inayah’s consumption level. Also illustrate it using the two-dimensional labeled diagram.
Assume that Inayah’s consumption of milk and cookies give her following level of utility:

Quantity	MU _milk	MU _cookies
1	400	450
2	350	200
3	200	150
4	100	100
5	70	60
6	30	30
7	0	0

Find the optimal level of consumption.
Find the consumer equilibrium using the two-dimensional labeled diagram.

please solve part 4 (1) and (2).

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