Refer to the graph below for questions 8a)-8c). Barney consumes gasoline and burritos and the graph illustrates his indifference curves. burritos 32 30 24 2222222101286 14 4 2 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 gasoline 8. Suppose Barney has an income of $120, P Pgasoline = $10, and Pburrito = $5. Draw Barney's budget constraint in the above figure. a) What is the opportunity cost of one unit of gasoline? b) At this income and prices of gasoline and burritos, what is the optimal consumption bundle for Barney? c) Suppose the price of gasoline falls from $10 to $5, with income and Pburritos staying the same. What is the change in the amount of demand for gasoline?

Refer to the graph below for questions 8a)-8c). Barney consumes gasoline and burritos and the graph illustrates his indifference curves. burritos 32 30 24 2222222101286 14 4 2 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 gasoline 8. Suppose Barney has an income of $120, P Pgasoline = $10, and Pburrito = $5. Draw Barney's budget constraint in the above figure. a) What is the opportunity cost of one unit of gasoline? b) At this income and prices of gasoline and burritos, what is the optimal consumption bundle for Barney? c) Suppose the price of gasoline falls from $10 to $5, with income and Pburritos staying the same. What is the change in the amount of demand for gasoline?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 1.3P

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