2. Suppose a consumer has a fixed budget of $200, and she spends it all on two goods, x1 and x2.The price of x, is $40 per unit and the price of x2 is $20 per unit; x, and x2 are normal goods.(a) Draw and label the consumer's budget constraint, with x1 on the horizontal axis and x2 onthe vertical axis.(b) What is the value of the consumer's marginal rate of substitution at her optimal con-sumption bundle? Explain what you your answer means.(c) Suppose the price of x, increases to $25 per unit. Graphically show the effect of this pricechange on the consumer's budget constraint.(d) Explain the impact of the substitution effect and the income effect of the price change inpart (c) on the individual's consumption of x, and x2. (Hint: For full credit, explain boththe separate and combined impacts of substitution and income effects on x1. Do the samefor x2).

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2. Suppose a consumer has a fixed budget of $200, and she spends it all on two goods, x1 and x2. The price of x, is $40 per unit and the price of x2 is $20 per unit; x, and x2 are normal goods. (a) Draw and label the consumer's budget constraint, with x, on the horizontal axis and x2 on the vertical axis. (b) What is the value of the consumer's marginal rate of substitution at her optimal con- sumption bundle? Explain what you your answer means. (e) Suppose the price of x2 increases to $25 per unit. Graphically show the effect of this price change on the consumer's budget constraint.