Would you expect marginal utility to rise or fall with additional consumption of a good? Why? b. Raymond consumes meatloaves and pineapples. He has decided that his monthly budget will be $1500. Suppose that one meatloaf costs $375, while one pineapple costs $150. i. What is the expression for Raymond’s budget constraint? ii. Draw a graph of Raymond’s budget line (meatloaf on the y axis). iii. Show how Raymond’s budget line changes if the price of pineapples increases to $370. iv. Suppose Raymond decides to cut his monthly budget in half.
Would you expect
b. Raymond consumes meatloaves and pineapples. He has decided that his
monthly budget will be $1500. Suppose that one meatloaf costs $375, while one pineapple costs $150.
i. What is the expression for Raymond’s budget constraint?
ii. Draw a graph of Raymond’s budget line (meatloaf on the y axis).
iii. Show how Raymond’s budget line changes if the price of pineapples
increases to $370.
iv. Suppose Raymond decides to cut his monthly budget in half.
Coincidentally, the next time he shops, he learns that meatloaves and
pineapples are on sale for half price. Show what happens to Raymond’s
budget line?
c. Shannon consumes dresses and lemonade. The price of a dresses is $10 and the price of a lemonade is $30. She is spending all her income on the two goods and her marginal rate of substitution of lemonade for dresses is 2. Is she at an optimum? Explain
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