ISI question

[RichaS]

How to we represent the answer to part c?

[RichaS]

a) The Indifference curves will be positively shaped and increase in the smoke has to be compensated by an increase in the distance travelled.

Is this correct?

[RichaS]

b) The budget constraint should be M<= p*x.

How do we represent this on the (s,x) graph?

[Abhitesh]

ICs seem correct. There can be cases of straight line and concave curves. The only condition is the question is positive slope. IMO convex curves are more realistic as the more smoke you breath the greater will be marginal disutility.

s=(alpha)x ; 0<=x<=M/p is the budget line.