(A) Bill receives-- every month-- 50 Beanies and 100 geology books. Well-established markets exist for both. He can buy or sell Beanies at a price of $4 per Beanie and buy or sell geology books for 50 cents per book. Derive his budget constraint (B) Suppose that both goods are normal and that at current prices he chooses to consume 20 books per month and 60 Beanies. If the price of books were to fall, what would we expect to see happen to Bill's consumption of Sbooks? Explain. (C) Now suppose that the price at which Bill can buy books is 50 cents per book but the price at which he can sell is 40 cents. Moreover, suppose that the buy price for Beanies is $4 per Beanie but the sell price is $3. Derive Bill's budget constraint.
(A) Bill receives-- every month-- 50 Beanies and 100 geology books. Well-established markets exist for both. He can buy or sell Beanies at a price of $4 per Beanie and buy or sell geology books for 50 cents per book. Derive his budget constraint
(B) Suppose that both goods are normal and that at current prices he chooses to consume 20 books per month and 60 Beanies. If the price of books were to fall, what would we expect to see happen to Bill's consumption of Sbooks? Explain.
(C) Now suppose that the price at which Bill can buy books is 50 cents per book but the price at which he can sell is 40 cents. Moreover, suppose that the buy price for Beanies is $4 per Beanie but the sell price is $3. Derive Bill's budget constraint.
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