Assume that a consumer has a budget of $45 to allocate over two products, milk (M) and
bread (B). The price of milk isPM= $4.50and the price of bread isPB= $5.50.
1(a):Draw a graph of the budget constraint, assuming that the quantity of milk (QM) is on
the horizontal axis.
1(b):Include on your budget constraint the following four allocations (and clearly identify the quantities of both products implied by each point):
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1. point A: when the consumer chooses to consume 4 units of milk
2. point B: when the consumer chooses to consume 3.