Exercise 5.6: Alan can spend $10 a week on snacks. He likes ice cream, which costs $1 per ounce, and


Question: Exercise 5.6: Alan can spend $10 a week on snacks. He likes ice cream, which costs $1 per ounce, and popcorn which costs 40 cents per ounce. Draw Alan's budget line and indifference curves (assuming each IC has a declining MRS) and show his best choice. Now imagine that his older sister Alice hates ice cream but always steals half his popcorn. How does this problem change Alan's budget line? On the indifference curves you've drawn, show his new best choice.

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Answer: The solution consists of 2 pages
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