Problem : Kate has \$12. Pretzels cost \$2 a bag, and soda costs \$3 a bottle. Draw her budget constraint. If soda goes on sale for \$2 a bottle, what does her new budget constraint look like?

Problem : Jeannette has \$300. DVD's cost \$30 and CD's cost \$15. Draw her budget constraint for DVD's and CD's. Draw her budget constraint if she has \$360.

Problem : J.P.'s indifference curves for beer and movies look like this:

Beer costs \$4 and movies cost \$6. If J.P. has \$24, how much of each will he buy?

If you draw in J.P.'s budget constraint, you can see that the optimal point would be at about 2 movies and 3 beers.

Problem : Draw the indifference curves for cashmere sweaters and moth-eaten sweaters (assuming that moth-eaten sweaters are undesirable and cashmere sweaters are desirable).

Problem : Lawrence is looking for tables and chairs. His indifference curves look like this:

He has \$500 to spend, how many tables and chairs will he buy if chairs cost \$50 and tables cost \$100?

If you draw in Lawrence's budget constraint, you can see that his optimal combination would be about 3 tables and 4 chairs.