Final answer:
An indifference curve represents combinations of two goods giving the same utility. A budget constraint reflects the combinations that can be afforded. A raise shifts the constraint rightward, allowing higher utility and different optimal choices.
Step-by-step explanation:
The indifference curve for Chaim's utility for Mishpacha Magazine and Ami Magazine represents all combinations of the two magazines that provide Chaim with the same level of satisfaction or utility. The first curve is downward-sloping due to the principle of diminishing marginal utility, meaning that as Chaim consumes more of one magazine, he needs to consume less of the other to maintain the same level of utility.
Chaim's budget constraint is depicted as a straight line. This line represents all possible combinations of Mishpacha and Ami Magazines that Chaim can afford given his income and the prices of the magazines. The slope of the budget constraint represents the rate at which Chaim can trade one magazine for another while staying within his budget.
Following Chaim's raise, the budget constraint would shift to the right, as he now has more income to spend on magazines. Consequently, Chaim can afford to reach a higher indifference curve, indicating higher utility.
To find Chaim's highest utility point, one would draw a tangent from the new budget line to the highest possible indifference curve. This tangency point signifies the optimal combination of Mishpacha and Ami Magazines that maximizes Chaim's utility given his budget.