Mary allocates $50 per month to spend on coffee and cookies. The price of coffee is $3 and the price of a cookie is $2. a. Create Mary’s budget constraint for coffee and cookies. b. Show the change in the budget constraint if the price of coffee increased to $4. c. Show the change in the budget constraint if the price of cookies decreased to $1.5. d. Suppose Mary received a bonus and allocated extra $20 for coffee and cookies. Show the change in her budget constraint. e. Can you determine the point in her budget constraint Mary would choose to consume? Why?

Mary allocates $50 per month to spend on coffee and cookies. The price of coffee is $3 and the price of a cookie is $2. a. Create Mary’s budget constraint for coffee and cookies. b. Show the change in the budget constraint if the price of coffee increased to $4. c. Show the change in the budget constraint if the price of cookies decreased to $1.5. d. Suppose Mary received a bonus and allocated extra $20 for coffee and cookies. Show the change in her budget constraint. e. Can you determine the point in her budget constraint Mary would choose to consume? Why?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 9SQ

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