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II. (Budget Constraint) Put meat on horizontal and potatoes on vertical axis. 1. (Day 1) Suppose...

II. (Budget Constraint) Put meat on horizontal and potatoes on vertical axis.
1. (Day 1) Suppose your income is $1000, prices of meat and potatoes are $10 and $20, respectively. Find the budget constraint equation and draw the budget line. Explain what the two intercepts mean.


2. (Day 2) Now meat has become cheaper. It costs $5. Your income and the price of potatoes did not change. Answer the same questions given in 1.



3. (Day 3) The next day, in addition to the price drop on Day 2, your income also dropped from $1000 to $500. Answer the same questions given in 1.


4. Compare Day 1 and Day 3. Is it possible to determine when you are better off? If yes, when are you better off? Explain

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