
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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
Transcribed Image Text:Given the preceding graph and knowing the price of a latte is $4, Neha's available income for lattes and scones is $
Using the income amount you just computed, complete the following table by finding the price of a scone when BC, represents Neha's budget
constraint and when BC, represents her budget constraint. Then indicate the quantity of scones consumed in each of those scenarios.
Price
Consumption
When Neha's budget constraint is...
(Dollars per scone)
(Scones)
BC1
BC,
Given the price-quantity combinations from the preceding table, use the blue line (circle symbol) to plot Neha's demand for scones on the following
graph.
Hint: Assume that Neha's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then
place the blue line on the following graph so that it passes through these two points.
10
9
Demand
8

Transcribed Image Text:Neha lives in San Diego and enjoys drinking lattes and eating scones. The price of a latte is held constant at $4 throughout this problem.
On the following graph, the purple curves (I and I2) represent two of Neha's indifference curves. The lines BC, and BC2 show two budget
constraints. Points X and Y show Neha's optimum consumption bundles subject to these budget constraints.
20
18
16
14
12
10
8
6.
4
BO
BC
2
4
8
10
12
14
16
18
20
SCONES
LATTES
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