A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per bottle. a. Draw the consumer's budget constraint (put pillow on the horizontal axis). What is the slope of this budget constraint? b. Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both pillows and soda are normal goods. c. The price of pillows rises from $35 to $40 per pillow, while the price of sodas is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects. d. Under what circumstance(s) if any can an increase in the price of pillows induce a consumer to buy more of that good? Explain. e. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.

Question 5     Andrew is currently spending all his income on 2 goods, burgers and Pepsi. He buys burgers at 4 L.E. a unit, with a total utility of 1000 and a marginal utility of 24. He buys Pepsi at 1 L.E a unit with a total utility of 800 and a marginal utility of 18. In order of reach consumer equilibrium, he should consume:            The same amount of burgers and Pepsi.            More Pepsi but the same amount of burgers.            More Pepsi and less burgers.            More burgers but the same amount of Pepsi.            More burgers and less Pepsi.

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Consumer choiceJo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The priceof muffins is $1.25. The price of cupcakes is $1.75.a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of thequantity of muffins.