Aarya's favorite past-times are playing miniature golf and racing go-karts. In her 2023 annual budget she included $800 for entertainment. In the city where she lives, a game of mini-golf costs $10 and one go-kart race costs $40. Draw an appropriate economic graph indicating Aarya's budget constraint and an indifference curve indicating optimum consumption (assume the equal-marginal principle holds true) for 2023. Then suppose that in 2024, Aarya decides to decrease her entertainment budget by 25% because she wants to save money for a new car. At the same time, prices for mini-golf and go-kart racing have increased by 15%. Calculate Aarya's new budget constraint, prices, and optimum consumption for 2024. On the same graph as 2023, draw Aarya's 2024 budget constraint and optimum consumption indifference curve. Clearly demonstrate how the optimal combination of past-times in 2023 compares to the optimal combination in year 2024.

Aarya's favorite past-times are playing miniature golf and racing go-karts. In her 2023 annual budget she included $800 for entertainment. In the city where she lives, a game of mini-golf costs $10 and one go-kart race costs $40. Draw an appropriate economic graph indicating Aarya's budget constraint and an indifference curve indicating optimum consumption (assume the equal-marginal principle holds true) for 2023. Then suppose that in 2024, Aarya decides to decrease her entertainment budget by 25% because she wants to save money for a new car. At the same time, prices for mini-golf and go-kart racing have increased by 15%. Calculate Aarya's new budget constraint, prices, and optimum consumption for 2024. On the same graph as 2023, draw Aarya's 2024 budget constraint and optimum consumption indifference curve. Clearly demonstrate how the optimal combination of past-times in 2023 compares to the optimal combination in year 2024.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 1PA

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