Joy’s budget permits her to spend $5,000 per month on either business travel or electronicmedia to transact business. The price of business travel was initially $1,000 per trip and theprice of electronic media was $500 per hour.a) Graphically sketch Joy’s budget line. b) Graphically illustrate how a 20 percent decline in the price of business travel would impact Joy’s budget set.c) Suppose that, after the price of business travel drops, Joy’s marginal rate of substitution between electronic media and business travel -1. Is she allocating resources efficiently? Explain.
Joy’s budget permits her to spend $5,000 per month on either business travel or electronicmedia to transact business. The price of business travel was initially $1,000 per trip and theprice of electronic media was $500 per hour.a) Graphically sketch Joy’s budget line. b) Graphically illustrate how a 20 percent decline in the price of business travel would impact Joy’s budget set.c) Suppose that, after the price of business travel drops, Joy’s marginal rate of substitution between electronic media and business travel -1. Is she allocating resources efficiently? Explain.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 6QFR
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Joy’s budget permits her to spend $5,000 per month on either business travel or electronic
media to transact business. The
price of electronic media was $500 per hour.
a) Graphically sketch Joy’s budget line.
b) Graphically illustrate how a 20 percent decline in the price of business travel would impact Joy’s budget set.
c) Suppose that, after the price of business travel drops, Joy’s marginal rate of substitution between electronic media and business travel -1. Is she
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