The Einstein Bagel Corp. offers a frequent buyer program whereby a consumer receives a stamp each time she purchases one dozen bagels for $6. After a consumer accrues I 0 stamps, she receives one dozen bagels free. This offer is an unlimited offer, valid throughout the year. The manager knows her products are normal goods. Given this information, construct the budget set for a consumer who has $200 to spend on bagels and other goods throughout the year. Does Einstein's frequent buyer program have the same effect on the consumption of its bagels that would occur if it simply lowered the price of one dozen bagels by 3 percent? Explain

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Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.