Granny lives in the Woods and consumes only bread and fruits. One week she falls ill and has to ask her niece, Red, to buy her weekly food. Red lives in the City, where the price of fruit is $ 2 per kilogram and the price of bread is also $ 2 per loaf. Red knows that Granny's utility function is given by U(f, b) = In (f) + 2 In (b) and that Granny has allocated $ 60 of her income for food each week. Heading to Granny's house in the Woods with the food bought from the City in her basket, Red unexpectedly meets the infamous trader B. B. Wolf, which offers to buy or sell food at a price of $ 3per kilogram of fruits, and $ 6per loaf of bread. Show graphically, what is the Red's budget line before meeting with Wolf and the budghet line after meeting with Wolf?
Granny lives in the Woods and consumes only bread and fruits. One week she falls ill and has to ask her niece, Red, to buy her weekly food. Red lives in the City, where the
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