Kath has $80 (income M) to spend on pizza (good 1x) and coke (good 2x). The price of a slice of pizza is $4 and the price of a can of coke is $1.

1) If Kath buys only pizza, how many can she buy?

2) If Kath were to buy 10 slices of pizza, how many cans of coke can be bought with the income left over? If she then consumes one less pizza (from 10 to 9), how many more cans of coke can be bought?

3) Formulate the intercept-slope equation of Kath’s budget line.

4) Graph Kath’s budget line.

5) Assume that, other things being equal, pizza now costs $2 each. Precisely explain the effect on the opportunity cost of pizza.