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Explain what the budget line represents

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A) UTILITY THEORY Jennifer Lopes has just finished recording another album and needs to relax. She bought 3 lemon bars and 4 cold drinks and has spent all of her budget. The marginal utility of her 4th cold drink is (MUc=60) and her 3rd lemon bar is MUL=40, and the price of cold drinks are Pc =$2.00 and lemon bars is PL=$1.50. "She has purchased too many lemon bars to maximize her utility" TRUE or FALSE Explain.

B) How much ($) is her budget and explain what the budget line represents.

C) "The larger the substitution effect, the flatter is the demand curve, but the larger the income effect the steeper the demand curve." TRU or FALSE. Explain in words.

Reference no: EM132499883

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