8. An individual's budgetSuppose Carlos has a yearly budget of $160 to spend on milk and cereal. Milk is priced at $4 per gallon, and cereal is priced at $2 per box.If Carlos spends his entire $160 on milk, he can buyCEREAL (Boxes)Use the blue line (circle symbol) to plot Carlos's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the areathat represents combinations of milk and cereal that are affordable for Carlos. Finally, place the black point (plus symbol) on the point on Carlos's budgetconstraint that corresponds to a scenario in which Carlos spends $80 on each good.Note: Dashed drop lines will automatically extend to both axes.12011010090807060504030201000 10 20 30gallons of milk. If he spends his entire $160 on cereal, he can buy40 50 60 70MILK (Gallons)80 90 100 110 120BC, ($160)Affordable Region$80 on Eachboxes of cereal.BC₂ ($200) What does the slope of Carlos's budget constraint represent?The cost of an additional gallon of milk in terms of dollarsThe opportunity cost of an additional box of cereal in terms of gallons of milkThe cost of an additional box of cereal in terms of dollarsThe opportunity cost of an additional gallon of milk in terms of boxes of cerealSuppose Carlos receives $40 from his grandmother and decides to dedicate this money to buying more milk and cereal.Using the green line (triangle symbol), draw Carlos's new budget constraint on the previous graph.True or False: Carlos faces the same tradeoff between milk and cereal.TrueFalse

This can be defined as the concept that shows what an individual give up when an individual choose…

Suppose Carlos has a yearly budget of $160 to spend on milk and cereal. Milk is priced at $4 per gallon, and cereal is priced at $2 per box. If Carlos spends his entire $160 on milk, he can buy gallons of milk. If he spends his entire $160 on cereal, he can buy boxes of cereal. Use the blue line (circle symbol) toplot Carlos's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of milk and cereal that are affordable for Carlos. Finally, place the black point (plus symbol) on the point on Carlos's budget constraint that corresponds to a scenario in which Carlos spends $80 on each good. Note: Dashed drop lines will automatically extend to both axes.

Suppose Carlos has a yearly budget of $160 to spend on milk and cereal. Milk is priced at $4 per gallon, and cereal is priced at $2 per box. If Carlos spends his entire $160 on milk, he can buy gallons of milk. If he spends his entire $160 on cereal, he can buy boxes of cereal. Use the blue line (circle symbol) toplot Carlos's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of milk and cereal that are affordable for Carlos. Finally, place the black point (plus symbol) on the point on Carlos's budget constraint that corresponds to a scenario in which Carlos spends $80 on each good. Note: Dashed drop lines will automatically extend to both axes.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 8P

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