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Suppose Alphonso’s town raises the
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How is his budget constraint affected from all three changes? Explain.
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Principles of Economics 2e
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- Raymond consumes meatloaves and pineapples. He has decided that hismonthly budget will be $1500. Suppose that one meatloaf costs $375, while onepineapple costs $150.i. What is the expression for Raymond’s budget constraint? ii. Draw a graph of Raymond’s budget line (meatloaf on the y axis).arrow_forwardSuppose a student has monthly income of Rs 20,000. He consumes only two commoditiesSandwich and Shawarma. The cost of Sandwich is Rs 100 each, and the cost of Shawarma isRs 200 each.a) Draw the student’s budget constraint. What is the slope of his budget constraint?b) Suppose student gets a raise, so his income increases from Rs 20,000 to Rs 24,000. Showwhat happens to consumer optimal consumption choice if both Sandwich and Shawarmaare normal goods. Now show what happens if Sandwich is an inferior good.c) Suppose consumer income decreases to Rs. 16,000. Show what happens if both Shawarmaand Sandwich are normal goods. Now show what happens if Sandwich is an inferior good.arrow_forwardRefer to Figure 6.1. Assume Tom's budget constraint is AC. If the price of a hot dog is $3, the price of ahamburger isA) $12. B) $6. C) $3. D) $1.50.arrow_forward
- Jody has $360 to spend on her summer vacation. She decided to use the moneyon trips to the zoo and on tickets to the movies. Her original budget constraintis shown below. Let X represent movie tickets and Y represent trips to the zoo.i. What is the equation of the original budget constraintarrow_forwardWrite out the standard form of a budget constraint (meaning only with variables, no numbers). Then, write a budget constraint that represents the following situation and graph it (LABEL YOUR AXES, INTERCEPTS, AND SLOPE!!!!!) The price of apples is $2 per pound and the price of bananas is $3 per pound. You have $25 available to spend on apples and bananas combined.arrow_forwardCan you please assist? Raymond consumes meatloaves and pineapples. He has decided that his monthly budget will be $1500. Suppose that one meatloaf costs $375, while one pineapple costs $150. a. What is the expression for Raymond’s budget constraint? b. Draw a graph of Raymond’s budget line (meatloaf on the y axis).arrow_forward
- Use this information to answer the following 4 questions: Marie has a weekly budget of $24,which she likes to spend on magazines and pies.24. If the price of a magazine is $4 each, what is the maximum number of magazines she couldbuy in a week?25. If the price of a pie is $12, what is the maximum number of pies she could buy in a week?26. Draw Marie’s budget constraint with pies on the horizontal axis and magazines on thevertical axis. What is the slope of the budget constraint?27. What is Marie’s opportunity cost of purchasing a pie? I need help with number 26 and 27.arrow_forward7. Bob receives utility from days spent traveling on vacation domestically (D) and daysspent traveling in a foreign country (F) as given by the utilityU(D; F) = DFThe price of a day spent traveling domestically is 160 pounds and in a foreigncountry 200 pounds. Bobís annual budget for traveling is 8000 pounds. (a) Find Bobís utility maximising choice of days traveling domestically and of daystravelling in a foreign country. Find also his utility level from consuming thatbundle. Suppose that the price of domestic traveling increases to 250 pounds per day.Denoting his budget for traveling x, (suppose by now that it is unknown) findthe demand for D and F under the new prices as a function of x.arrow_forwardPart 1: Budget Constraints Suppose you have $48 to spend on the two items in the graph below. Q books 5 3 A 1 2 4. 6 8 Q movietickets If movies cost $8, which line represents your budget constraint? [Select] If books cost $12, which line represents your budget constraint? [ Select ] Suppose your budget constraint shifts from line C to line A. What has occurred? [ Select ] Suppose your budget constraint shifts from line A to line B. What has occurred? [ Select ]arrow_forward
- 1. 2. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal rate of substitution? d. What two conditions must be met in order for Frank to maximize his utility? e. What are the utility maximizing quantities of plane trips and bus trips for Frank? Given income of $1000, Px = 25 and Py = 40, find (1) a function for the MRS and (2) the utility maximizing consumption bundle for each of the…arrow_forwardConsider a graph with paper on the x-axis and pencils on the y-axis. If the price of pencils increases, then (select all that apply): Check All That Apply the budget constraint will become steeper (the absolute value of the slope will increase).the budget constraint will become steeper (the absolute value of the slope will increase). the budget constraint will become flatter (the absolute value of the slope will decrease). the budget constraint will become flatter (the absolute value of the slope will decrease). the slope of the budget constraint will not change.the slope of the budget constraint will not change. the x-intercept will increase.the x-intercept will increase. the x-intercept will decrease.the x-intercept will decrease. the x-intercept will not change.the x-intercept will not change. the y-intercept will increase.the y-intercept will increase. the y-intercept will decrease.the y-intercept will decrease. the y-intercept will not…arrow_forwardA penurious graduate student has a food budget of $100.00/week. To survive with sufficient energy to attend classes, he knows that he needs to consume 50 protein units per week. The only two foods he can stand to eat on a regular basis are beans and hamburger. He derives twice as ich pleasure per protein unit from eating hamburger as he does from beans. a. Assume that hamburger costs $3.00 per protein unit and beans cost $1.00 per protein unit. Formulate the student's diet problem as a linear program. (You can assume he wants to maximize his "total utility" from his diet and that he gets I utile from each protein unit of beans he consumes and 2 utiles from each pro- tein unit of hamburger.) What is the optimal consumption of beans and ham- burger in this case? b. Plot the student's price-response curve for beans as the price of beans goes from $0.01 to $2.00, assuming that everything else (including the price of hamburger) stays constant. Note that his individual price-response…arrow_forward
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