8. Suppose that you are able to consume only two goods, coffee and donuts. Use a graphical and written analysis to answer the following questions. a. Draw your budget constraint for coffee and donuts. Please put donuts per week on the y-axis and cups of coffee per week on the x-axis. Label all axes. Illustrate the optimal bundle E. b. Suppose you learn that coffee will prolong your life. Illustrate this new information on the budget constraint in your graph. Identify the new equilibrium bundle E'. Do you now drink more or less coffee than before the new information? Why?
8. Suppose that you are able to consume only two goods, coffee and donuts. Use a graphical and written analysis to answer the following questions. a. Draw your budget constraint for coffee and donuts. Please put donuts per week on the y-axis and cups of coffee per week on the x-axis. Label all axes. Illustrate the optimal bundle E. b. Suppose you learn that coffee will prolong your life. Illustrate this new information on the budget constraint in your graph. Identify the new equilibrium bundle E'. Do you now drink more or less coffee than before the new information? Why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![8. Suppose that you are able to consume only two goods, coffee and donuts. Use a graphical and written analysis
to answer the following questions.
Draw your budget constraint for coffee and donuts. Please put donuts per week on the y-axis and cups of
coffee per week on the x-axis. Label all axes. Illustrate the optimal bundle E.
b. Suppose you learn that coffee will prolong your life. Illustrate this new information on the budget
constraint in your graph. Identify the new equilibrium bundle E'.
Do you now drink more or less coffee than before the new information? Why?
d. Are you better off, worse off, or as well off at the new equilibrium as the old? How can you be sure of your
answer?
a.
с.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6274a625-9a74-4008-b392-f1961eea52c4%2F50a165e4-d075-48d9-a24e-d23490f2851e%2Fvd1fky_processed.jpeg&w=3840&q=75)
Transcribed Image Text:8. Suppose that you are able to consume only two goods, coffee and donuts. Use a graphical and written analysis
to answer the following questions.
Draw your budget constraint for coffee and donuts. Please put donuts per week on the y-axis and cups of
coffee per week on the x-axis. Label all axes. Illustrate the optimal bundle E.
b. Suppose you learn that coffee will prolong your life. Illustrate this new information on the budget
constraint in your graph. Identify the new equilibrium bundle E'.
Do you now drink more or less coffee than before the new information? Why?
d. Are you better off, worse off, or as well off at the new equilibrium as the old? How can you be sure of your
answer?
a.
с.
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