Answer :
Final answer:
Akwesi's budget line with a monthly income of GHC100 allows him to purchase combinations of chicken and potatoes up to that amount. A reduction in income shifts his budget line to the left and, given that potatoes are an inferior good, may increase his potato consumption while reducing his chicken consumption.
Explanation:
Adjusting to Income Changes in Budget Constraints
When drawing a budget line for Akwesi with a monthly income of GHC100, where chicken costs GHC10 per pound and potatoes cost GHC2 per pound, we would see that he can buy a combination of goods that total up to GHC100. If Akwesi maximizes utility at the combination of 5 pounds of chicken and 25 pounds of potatoes, then his indifference curve is tangent to the budget line at this point. When Akwesi's income falls to GHC80, we draw a new budget line that represents this decrease. Since potatoes are considered an inferior good for Akwesi, a decline in income might actually lead to an increase in potato consumption as Akwesi substitutes away from the relatively more expensive chicken towards more potatoes.
Therefore, with a reduced income, Akwesi's budget line shifts to the left, and a new indifference curve will be tangent to this new budget constraint. Given the inferiority of potatoes, his consumption of potatoes would likely increase, whereas his consumption of chicken would decrease due to the lower income.