Solution

1. Roland's feasible set is the shaded area below:

   

   The intercepts show his maximum consumption of each good and are found by dividing his income by the corresponding price: $80/$2 = 40 for gin and $80/$4 = 20 for herring. The slope of the budget constraint is equal to the negative of the ratio of the prices: -Px/Py = -$4/$2 = -2.

2. Adding in the time constraint means that Roland's maximum consumption of gin or herring is 4. His feasible set is reduced to the shaded area below:

   

3. Roland's money BC changes but it still remains outside his time constraint, as shown in the diagram below. As a result, Roland's feasible set has not changed. He will not care about the price rise because it will have no effect on the consumption bundle he ultimately chooses.