Graphically draw and explain the income effect curve: 1.Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie’s income is m. (b)Suppose m = $60. Write down Annie’s budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully.  (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve.

a) Suppose a consumer has a budget for fast-food items of $20 per week and spends this money on two goods, hamburgers and pizzas. Suppose hamburgers cost $5 each and pizzas cost $10. Put the quantity of hamburgers purchased per week on the horizontal axis and the quantity of pizzas purchased per week on the vertical axis. Draw the budget line. What is its slope (use MRS formula to calculate the slope)?   b) Suppose the consumer in part (a) is indifferent among the combinations of hamburgers and pizzas shown. In the grid you used to draw the budget lines, draw an indifference curve passing through the combinations shown, and label the corresponding points A, B, and C. Label this curve I. Combinations Hamburgers/Week Pizzas/Week A 5 0 B 3 ½ C 0 3   c) The budget line is tangent to indifference curve, determine that point and explain the meaning of this tangency.

Centa spends $56 a month at allthemovies.com on film-noir (FN) and sci‑fi (SF) movies, which typically cost $14 each. The first graph shows her budget constraint and her optimal consumption at point A. This month, SF movies are on sale for $7. On the first graph, draw the new budget constraint by moving one or both endpoints of the original budget constraint. Points B, C, D, and E indicate possible consumption bundles. Assume that FN movies are still $14 each. Budget Constraint and Optimal ConsumptionQuantity of FN moviesQuantity of SF movies012345678910012345678910BCBCDEA On the second graph, draw Centa's individual demand curve for SF movies from a price of $14 to a price of $7. Do not continue the line past these points to the axes. Individual Demand for SF MoviesPrice of SF moviesQuantity of SF movies01234567891001234567891011121314demand As with Centa's demand for SF movies, the law of demand states that price and quantity demanded are not correlated. perfect…

Question 3 (Budget Constraint). Vince consumes gas (x1) and food (x2). Suppose the price of gas is $5 per gallon and the price of food is $10 per pound. Vince has $200 per week that he spends on the two goods. a) Draw his weekly budget constraint and put gas on the horizontal axis (food on vertical axis). Label the axes, intercepts, and slope of the budget line. (Note: draw a large graph) b) Suppose there is a gas shortage and the government limits the amount of gas to 30 gallons per consumer per week. Draw this new budget constraint on the graph above (you may use dashed line to reflect ration) c) Alternatively (instead of the ration in part b)), suppose the price of gas increases to $8 per gallon. Draw this new budget constraint on the graph above. d) Does Vince prefer the ration of the increase in prices? Explain why. If his preference cannot be determined, explain why not.

Assignment Graphically draw and explain the income effect curve: 1. Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie's income is m. (b)Suppose m = $60. Write down Annie's budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully. ( 02 Marks) (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve. (02 Marks) 2. Why indifference curves never intersect. Prove graphically? (1 Mark)