1. An individual's budget Suppose Bob has a yearly budget of $120 to spend on oat milk and peanut butter. Oat milk is priced at $2 per quart, and peanut butter is priced at $6 per jar. If Bob spends his entire $120 on oat milk, he can buy jars of peanut butter. Use the blue line (circle symbol) to plot Bob's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of oat milk and peanut butter that are affordable for Bob. Finally, place the black point (plus symbol) on the point on Bob's budget constraint that corresponds to a scenario in which Bob spends $60 on each good. Note: Dashed drop lines will automatically extend to both axes. PEANUT BUTTER (Jars) 120 110 100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 + 40 50 60 70 OAT MILK (Quarts) quarts of oat milk. If he spends his entire $120 on peanut butter, he can buy + + 80 90 + H 100 110 120 BC, ($120) ☐ Affordable Region $60 on Each BC₂ ($240) ?

ENGR.ECONOMIC ANALYSIS
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1. An individual's budget
Suppose Bob has a yearly budget of $120 to spend on oat milk and peanut butter. Oat milk is priced at $2 per quart, and peanut butter is priced at $6
per jar.
If Bob spends his entire $120 on oat milk, he can buy
jars of peanut butter.
Use the blue line (circle symbol) to plot Bob's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area
that represents combinations of oat milk and peanut butter that are affordable for Bob. Finally, place the black point (plus symbol) on the point on
Bob's budget constraint that corresponds to a scenario in which Bob spends $60 on each good.
Note: Dashed drop lines will automatically extend to both axes.
PEANUT BUTTER (Jars)
120
110
100
90
80
70
60
50
40
30
20
10
0
0
10
20
30
+
40 50 60 70
OAT MILK (Quarts)
quarts of oat milk. If he spends his entire $120 on peanut butter, he can buy
+ +
80 90
+
H
100 110 120
BC, ($120)
☐
Affordable Region
$60 on Each
BC₂ ($240)
?
Transcribed Image Text:1. An individual's budget Suppose Bob has a yearly budget of $120 to spend on oat milk and peanut butter. Oat milk is priced at $2 per quart, and peanut butter is priced at $6 per jar. If Bob spends his entire $120 on oat milk, he can buy jars of peanut butter. Use the blue line (circle symbol) to plot Bob's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of oat milk and peanut butter that are affordable for Bob. Finally, place the black point (plus symbol) on the point on Bob's budget constraint that corresponds to a scenario in which Bob spends $60 on each good. Note: Dashed drop lines will automatically extend to both axes. PEANUT BUTTER (Jars) 120 110 100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 + 40 50 60 70 OAT MILK (Quarts) quarts of oat milk. If he spends his entire $120 on peanut butter, he can buy + + 80 90 + H 100 110 120 BC, ($120) ☐ Affordable Region $60 on Each BC₂ ($240) ?
What does the slope of Bob's budget constraint represent?
O The cost of an additional jar of peanut butter in terms of dollars
The cost of an additional quart of oat milk in terms of dollars
The opportunity cost of an additional jar of peanut butter in terms of quarts of oat milk
The opportunity cost of an additional quart of oat milk in terms of jars of peanut butter
Suppose Bob receives $120 from his relative and decides to commit this money to purchasing more oat milk and peanut butter.
Using the green line (triangle symbol), draw Bob's new budget constraint on the preceding graph.
True or False: Bob faces the same tradeoff between oat milk and peanut butter.
O True
False
Transcribed Image Text:What does the slope of Bob's budget constraint represent? O The cost of an additional jar of peanut butter in terms of dollars The cost of an additional quart of oat milk in terms of dollars The opportunity cost of an additional jar of peanut butter in terms of quarts of oat milk The opportunity cost of an additional quart of oat milk in terms of jars of peanut butter Suppose Bob receives $120 from his relative and decides to commit this money to purchasing more oat milk and peanut butter. Using the green line (triangle symbol), draw Bob's new budget constraint on the preceding graph. True or False: Bob faces the same tradeoff between oat milk and peanut butter. O True False
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