the MRS = -N/W.   The budget constraint is: 1,600 = 2*N + 20*W   Graph Qty of noodles (N) on vertical axis and Qty of wild rice (W) on horizontal axis.   SOLVE: a. Graph the budget constraint. label all points. What is the slope of the budget constraint? b. Find the optimal quantities of noodles(# of packages) and the wild rice (# of pounds) given the budget constraint. graph these optimal quantities. draw your indifference curve on the same graph. c. Show on your graph what happens when the price of wild rice increases to $40 per pound. Find your new optimal quantities of noodles and wild rice. label all points on graph. label the substitution effect and income effect.

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Revealed Preferences and Budget Constraint Analysis

Revealed means “Let Out,” and Preference means “Choice”; Choice Reveals Preference.