4.5. Maria's food and clothing consumption. Ten years ago, Maria had an income of 40, which she spent entirely on clothing (18 units) and food (22 units). Currently, Maria has an income of 56, which she spends entirely on clothing (28 units) and food (14 units). Ten years ago, the price of food was pf = 1 and the price of clothing was pc = 1. Today, the price of food is pf = 1.75, whereas the price of clothing is Pc = 1.12. (a) Plot Maria's choices on a graph with quantity of clothing on the horizontal axis and quantity of food on the vertical axis. Indicate Maria's budget constraint in each period as well as her optimal choice. (b) Suppose that Maria is a rational utility maximizer. Comparing income levels, can we tell whether Maria is better off or worse off at time 2 than at time 1? Why or why not? (Hint: draw indifference curves that are consistent with A and B being optimal choices.)

Something that is perceived as a luxury rather than a need is something that brings pleasure. Worldwide, the majority of people view food, shelter, and water as requirements. Undoubtedly, indoor plumbing and electricity would be included on the list by many Americans. As opposed to being a luxury, internet connection is increasingly considered as a need. But is it actually essential for surviving? What then happens to those who don't utilize or have access to the internet? Could the expansion of e-commerce be impacted by how people view Internet connection as a need or a luxury?

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