Problem 1. Martha's income is $40k/year. She can spend it on health care visits at $80/visit, or on groceries (standing for all other goods), which costs $100/bag of groceries. Draw Martha's budget constraint. Using indifference curves show martha's optimum if she buys 300 bags of groceries per year.
Problem 2. Suppose Martha's income increased to $42k/year and she increases her health care visits by 5/year. Use the graph from question 1 to draw a new equilibrium. What is her income elasticity of demand for healthcare visits?
Please describe in detail.