Question 12 Suppose Jane has a fixed income of 2000 and spends the entire income on commodity X and Y. The prices of commodity X and Y are 10 and 20 respectively. (i) Derive the consumer's budget equation and sketch the line of this equation plotting Y on the vertical axis and X on the horizontal axis. What is the slope of the budget line (i) and what does it mean? (iii) Assuming income and price of X remain the same, show the effect of a 50 percent reduction in the price of Y on the consumer's budget line. (iv) Show the effect of a 100 percent increase in income and a 50 percent reduction in prices on the consumer's budget line. If Joan's MUX = 0.5X-0.5y05 and MUy = 0.5X0.5Y-0.5 find the optimal bundle of X and Y that maximises Joan's utility.