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1. An individual's budget Suppose Cho has a monthly budget of $80 to spend on coffee and cereal. Coffee is priced at $4 per cup, and cereal is priced at $2 per box. If Cho spends her entire $80 on coffee, she can buy CEREAL (Boxes) Use the blue line (circle symbol) to plot Cho's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of coffee and cereal that are affordable for Cho. Finally, place the black point (plus symbol) on the point on Cho's budget constraint that corresponds to a scenario in which Cho spends $40 on each good. Note: Dashed drop lines will automatically extend to both axes. 60 55 50 45 40 35 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50 8 cups of coffee. If she spends her entire $80 on cereal, she can buy 55 60 BC, ($80) 0 Affordable Region + $40 on Each BC₂ ($100) boxes of cereal. ?

1. An individual's budget Suppose Cho has a monthly budget of $80 to spend on coffee and cereal. Coffee is priced at $4 per cup, and cereal is priced at $2 per box. If Cho spends her entire $80 on coffee, she can buy CEREAL (Boxes) Use the blue line (circle symbol) to plot Cho's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of coffee and cereal that are affordable for Cho. Finally, place the black point (plus symbol) on the point on Cho's budget constraint that corresponds to a scenario in which Cho spends $40 on each good. Note: Dashed drop lines will automatically extend to both axes. 60 55 50 45 40 35 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50 8 cups of coffee. If she spends her entire $80 on cereal, she can buy 55 60 BC, ($80) 0 Affordable Region + $40 on Each BC₂ ($100) boxes of cereal. ?

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 1PA
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Ab 10 

Economics 

x axis is coffee(cups) 

 

1. An individual's budget Suppose Cho has a monthly budget of $80 to spend on coffee and cereal. Coffee is priced at $4 per cup, and cereal is priced at $2 per box. If Cho spends her entire $80 on coffee, she can buy CEREAL (Boxes) Use the blue line (circle symbol) to plot Cho's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of coffee and cereal that are affordable for Cho. Finally, place the black point (plus symbol) on the point on Cho's budget constraint that corresponds to a scenario in which Cho spends $40 on each good. Note: Dashed drop lines will automatically extend to both axes. 60 55 50 45 40 35 30 25 20 + 15 10 5 + 0 + 0 5 10 15 20 25 30 35 40 45 cups of coffee. If she spends her entire $80 on cereal, she can buy 50 55 60 BC, ($80) 1 Affordable Region + $40 on Each boxes of cereal. BC₂ ($100)
Transcribed Image Text:1. An individual's budget Suppose Cho has a monthly budget of $80 to spend on coffee and cereal. Coffee is priced at $4 per cup, and cereal is priced at $2 per box. If Cho spends her entire $80 on coffee, she can buy CEREAL (Boxes) Use the blue line (circle symbol) to plot Cho's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of coffee and cereal that are affordable for Cho. Finally, place the black point (plus symbol) on the point on Cho's budget constraint that corresponds to a scenario in which Cho spends $40 on each good. Note: Dashed drop lines will automatically extend to both axes. 60 55 50 45 40 35 30 25 20 + 15 10 5 + 0 + 0 5 10 15 20 25 30 35 40 45 cups of coffee. If she spends her entire $80 on cereal, she can buy 50 55 60 BC, ($80) 1 Affordable Region + $40 on Each boxes of cereal. BC₂ ($100)
What does the slope of Cho's budget constraint represent? The cost of an additional cup of coffee in terms of dollars The opportunity cost of an additional cup of coffee in terms of boxes of cereal The opportunity cost of an additional box of cereal in terms of cups of coffee The cost of an additional box of cereal in terms of dollars Suppose Cho receives $20 from her grandmother and decides to dedicate this money to buying more coffee and cereal. Using the green line (triangle symbol), draw Cho's new budget constraint on the preceding graph. True or False: Cho faces the same tradeoff between coffee and cereal. True False
Transcribed Image Text:What does the slope of Cho's budget constraint represent? The cost of an additional cup of coffee in terms of dollars The opportunity cost of an additional cup of coffee in terms of boxes of cereal The opportunity cost of an additional box of cereal in terms of cups of coffee The cost of an additional box of cereal in terms of dollars Suppose Cho receives $20 from her grandmother and decides to dedicate this money to buying more coffee and cereal. Using the green line (triangle symbol), draw Cho's new budget constraint on the preceding graph. True or False: Cho faces the same tradeoff between coffee and cereal. True False
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