a. If the budget line is line 1, describe why point A is
Debra’s utility-maximizing choice.
b. What event could explain why the budget line moves to
line 2?
c. What is the meaning of point B in the figure?
d. Suppose Coronas are a normal good for Debra. What
does this restriction imply about the location of point
Is this restriction satisfied in the diagram?
e. Suppose Coronas are an inferior good for Debra. How
would this information be reflected in her choice
following the move of the budget line to line 2?
4. Consider your sets of indifference curves for
i. Coke and chips
ii. Coke and Pepsi
Explain why these sets of indifference curves are likely to look
different. Illustrate with a diagram. What does this difference
