Economics for Today 9th Edition by Irvin Tucker

Exercise 40

Let M represent the quantity of medical services, such as the number of doctor visits, and let O represent the quantity of other goods purchased by a consumer in a given year. Let the budget ( B ) be in thousands of dollars and the price of medical services and other goods be in terms of dollars per unit, with B = 60, P m = 6, and P o = 10.
a. Graph the budget line and determine the slope.
b. Show the result if the price of medical services ( P o ) decreases to $5.
c. Add two indifference curves to the graph that are tangent to the budget line and explain the result.