10. Deriving demand from an indifference map Valerie lives in San Francisco and enjoys drinking lattes and eating scones. The price of a latte is held constant at $4 throughout this problem. On the following diagram, the purple curves (I and I2) represent two of Valerie's indifference curves. The lines BL₁ and BL2 show two budget lines. Points X and Y show Valerie's consumer equilibriums subject to these budget lines. QUANTITY OF LATTES 20 18 16 14 12 10 8 6 2 0 ہے + 0 2 + 4 BL 6 8 10 12 QUANTITY OF SCONES 14 BL₁ BL₂ BL 16 18 20 Given the previous graph and knowing the price of a latte is $4, Valerie's budget is Using the budget amount you previously computed, complete the following table by finding the price of a scone when BL₁ represents Valerie's budget line and when BL represents her budget line. Then indicate the quantity of scones consumed in each of those scenarios. Price When Valerie's budget line is... (Dollars per scone) Consumption (Scones) Given the price-quantity combinations from the previous table, use the blue line (circle symbol) to plot Valerie's demand for scones on the following graph. Hint: Assume that Valerie's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blue line on the following graph so that it passes through these two points. (?) PRICE (Dollars per scone) 10 9 co 6 0 Given the previous graph and knowing the price of a latte is $4, Valerie's budget is S 10 Using the budget amount you previously computed, complete the following table by finding the price of a scone when BL₁ represents Valerie's budget line and when BL₂ represents her budget line. Then indicate the quantity of scones consumed in each of those scenarios. 3 0 Price When Valerie's budget line is... (Dollars per scone) 2 1 2 0 Given the price-quantity combinations from the previous table, use the blue line (circle symbol) to plot Valerie's demand for scones on the following graph. Hint: Assume that Valerie's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blue line on the following graph so that it passes through these two points. (?) 0 + 4 BL₁ BL₂ 2 BL 6 8 10 12 14 QUANTITY OF SCONES + 4 6 BL 16 18 20 8 10 12 QUANTITY (Scones) 14 16 Consumption (Scones) + 18 20 Demand