OA 136M 134M A+B A Y In this case, Intercept on COA axis=1.2 X 850,000+ 340,000=136 M Hence, analytically the budget constraint is given by CoA=1.36M-1.2C We can see that by undertaking the first project he can push out the line representing his possible consumption, similarly when he undertakes the second project, and so on. If he prefers more money to less, he is better off if his budget constraint is pushed out further since this allows him to consume more in both periods. Hence no matter what his preferences are, he is better off with a budget constraint that is farther out To see this we can represent preferences in this diagram by an indifference curve This is the locus of combinations of Coa and Cy such that he is indifferent 88 In this case, Intercept on COA axis = 1.2 x 850,000 + 340,000 = 1.36 M. Hence, analytically the budget constraint is given by COA = 1.36 M - 1.2 CY We can see that by undertaking the first project he can push out the line representing his possible consumption, similarly when he undertakes the second project, and so on. If he prefers more money to less, he is better off if his budget constraint is pushed out further since this allows him to consume more in both periods. Hence no matter what his preferences are, he is better off with a budget constraint that is farther out. To see this we can represent preferences in this diagram by an indifference curve. This is the locus of combinations of COA and CY such that he is indifferent