Question

1. The gragh below shows indifference curves (IC₁ and IC2) and budget constraints (BC₁, BC₂, BC) for All who enjoys consuming tacos with soda. (6 points) a. Based on the Budget Constraint BC2, if Ali's budget is $28 then what would be the the prices of soda and/or taco? b. What combination of tacos and soda quantities optimizes Ali's utility? Tacos 0 1 (2,3) 2 3 (4,3) BC3 IC1 BC2 6 7 8 IC 2 9 BC1 10 Cans of Soda​

Answer 1

I cannot interpret or analyze visual graphs. However, I can provide some general guidance on how to approach the questions:

a. To determine the prices of soda and/or taco based on the Budget Constraint BC2, you need to find the points where the budget line BC2 intersects with the axes (taco and soda quantities). The prices can be derived from the slope of the budget line, where the slope represents the rate at which one good can be traded for another.

b. To find the combination of taco and soda quantities that optimizes Ali's utility, you need to look for the point where the indifference curve (IC) is tangent to the budget line (BC). This point represents the maximum level of utility Ali can achieve within his budget constraint. It's the point where the marginal rate of substitution (MRS) between tacos and soda is equal to the price ratio of tacos to soda.