2. Zhoran has a budget of $36 for fruit. Strawberries cost $4 per pound and grapes cost $3 per pound. She likes both type of fruit and she has a diminishing marginal rate of substitution. (a) Draw a diagram illustrating Zhoran's budget constraint. Label both intercepts with their numerical values. What is the slope of her budget line? (b) Illustrate Zhoran's optimal combination of strawberries and grapes on your dia- gram. Any picture that is consistent with the facts described here is acceptable. Explain how your diagram demonstrates that the point you've chosen is the op- timal point for Zhoran.
2. Zhoran has a budget of $36 for fruit. Strawberries cost $4 per pound and grapes cost $3 per pound. She likes both type of fruit and she has a diminishing marginal rate of substitution. (a) Draw a diagram illustrating Zhoran's budget constraint. Label both intercepts with their numerical values. What is the slope of her budget line? (b) Illustrate Zhoran's optimal combination of strawberries and grapes on your dia- gram. Any picture that is consistent with the facts described here is acceptable. Explain how your diagram demonstrates that the point you've chosen is the op- timal point for Zhoran.
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 8P
Related questions
Question
![2.
Zhoran has a budget of $36 for fruit. Strawberries cost $4 per pound and
grapes cost $3 per pound. She likes both type of fruit and she has a diminishing
marginal rate of substitution.
(a) Draw a diagram illustrating Zhoran's budget constraint. Label both intercepts
with their numerical values. What is the slope of her budget line?
(b) Illustrate Zhoran's optimal combination of strawberries and grapes on your dia-
gram. Any picture that is consistent with the facts described here is acceptable.
Explain how your diagram demonstrates that the point you've chosen is the op-
timal point for Zhoran.
(c) Suppose Zhoran's budget increases to $48. How will this change her consumption
decision? Illustrate your answer on your diagram and explain your picture.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d9e168a-9464-4c08-8d6d-0c3b079a04ec%2F9a9c1927-a650-4d2c-ac82-e9772b75666b%2Fbmlwjpd_processed.png&w=3840&q=75)
Transcribed Image Text:2.
Zhoran has a budget of $36 for fruit. Strawberries cost $4 per pound and
grapes cost $3 per pound. She likes both type of fruit and she has a diminishing
marginal rate of substitution.
(a) Draw a diagram illustrating Zhoran's budget constraint. Label both intercepts
with their numerical values. What is the slope of her budget line?
(b) Illustrate Zhoran's optimal combination of strawberries and grapes on your dia-
gram. Any picture that is consistent with the facts described here is acceptable.
Explain how your diagram demonstrates that the point you've chosen is the op-
timal point for Zhoran.
(c) Suppose Zhoran's budget increases to $48. How will this change her consumption
decision? Illustrate your answer on your diagram and explain your picture.
Expert Solution
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Step 1
Consumer will maximise utility at a point where slope of an indifference curve is equal to the slope of a budget line.
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