Marsha has a salary of $500. He spends his entire budget on milk and cookies. The cost of a gallon of milk is $4 and the cost of a slice of cookies is $8. Construct Marsha’s budget constraint (place) cookies on the y-axis. Suppose Marsha’s salary rises by 50%. Also suppose that the price of milk and cookies each rise by 50%. Construct Marsha’s new budget constraint. What is the difference between the new and old budget constraints? Suppose that the price of cookies fell from $8 per cookie to $4. Construct Marsha’s new budget What is the difference between the new and old budget constraints. Explain the relationship between the budget constraint and indifference curve at consumer optimum
Marsha has a salary of $500. He spends his entire budget on milk and cookies. The cost of a gallon of milk is $4 and the cost of a slice of cookies is $8. Construct Marsha’s budget constraint (place) cookies on the y-axis. Suppose Marsha’s salary rises by 50%. Also suppose that the price of milk and cookies each rise by 50%. Construct Marsha’s new budget constraint. What is the difference between the new and old budget constraints? Suppose that the price of cookies fell from $8 per cookie to $4. Construct Marsha’s new budget What is the difference between the new and old budget constraints. Explain the relationship between the budget constraint and indifference curve at consumer optimum
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
ChapterP2: Microeconomics Fundamentals
Section: Chapter Questions
Problem 12KC
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- Marsha has a salary of $500. He spends his entire budget on milk and cookies. The cost of a gallon of milk is $4 and the cost of a slice of cookies is $8.
- Construct Marsha’s budget constraint (place) cookies on the y-axis.
- Suppose Marsha’s salary rises by 50%. Also suppose that the price of milk and cookies each rise by 50%. Construct Marsha’s new budget
constraint. What is the difference between the new and old budget constraints?
- Suppose that the price of cookies fell from $8 per cookie to $4. Construct Marsha’s new budget What is the difference between the new and old budget constraints.
- Explain the relationship between the budget constraint and indifference curve at consumer optimum.
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