A college students has two options for meals;eating at the dining hall for $6per meal or eating a Cup O' Soup for $1.50per meal.Her weekly food budget is $60.a.Draw the budget constraint showing the trade-off between dining hall meals and Cups O'Soup.assuming that she spends equal amount on both goods,draw an indifference curve showing the optimum choice.Label the optimum as point A.b.Suppose the price of a Cup O' Soup now rises to $2.Using your diagram from part(a),show the consequences of this change in price.assume that are students now spends only 30percent of her income on dining hall meals.Label the new optimum as point B.c.What happened to the quantity of Cup O 'Soup consumed as a result of this price change?What does this result say about the income and substitution effects?Explain.d.Use points A and B to draw a demand curve for Cup O'Soup.What is this type of good called?
A college students has two options for meals;eating at the dining hall for $6per meal or eating a Cup O' Soup for $1.50per meal.Her weekly food budget is $60.
a.Draw the budget constraint showing the trade-off between dining hall meals and Cups O'Soup.assuming that she spends equal amount on both goods,draw an indifference curve showing the optimum choice.Label the optimum as point A.
b.Suppose the price of a Cup O' Soup now rises to $2.Using your diagram from part(a),show the consequences of this change in price.assume that are students now spends only 30percent of her income on dining hall meals.Label the new optimum as point B.
c.What happened to the quantity of Cup O 'Soup consumed as a result of this price change?What does this result say about the income and substitution effects?Explain.
d.Use points A and B to draw a demand curve for Cup O'Soup.What is this type of good called?
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