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#### Concept explainers

Suppose Alphonso’s town raised the price of bus tickets to

The bus tickets in Alphonso ‘s town has increased to $1 per trip whereas the price of burger is constant at $2 and his income is $10 per week. Provide Alphonso’s new budget constraint. Also, comment about the opportunity cost of bus tickets.

## Answer to Problem 1SCQ

As the price of bus tickets rises, the opportunity cost of bus tickets falls.

### Explanation of Solution

The equation of budget constraint is:

Where,

Therefore, the equation of new budget constraint will be as follows:

The formula for opportunity cost of bus tickets would be:

So, as the price of bus tickets rises, the opportunity cost of bus tickets falls.

Budget Constraint: It is an equation which shows various combinations of units of good purchased at a particular price with given income.

Opportunity Cost: It is the cost of next best alternative activity.

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# Chapter 2 Solutions

Principles of Economics 2e

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