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Jack considers Bud (B) and Miller (M) as perfect substitutes at a 1:1 ratio. It is known that PB = 1, and PM = 2. Furthermore, we know that his income (let us use Y, as M is already denoting Miller) is 90, or Y = 90.
a) Graphically illustrate Jack's optimal consumption choice. Be sure to show all possible numerical information.
b) Suppose PB rose to $3. Graphically show his new choice. Be sure to decompose into an income and a substitution effect.
c) Derive Jack's demand for Miller.
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