Amy is in school learning to weld. She spends long hours studying (and drinking coffee), and long hours welding in the hot, dirty shop (and therefore takes frequent showers). Amy has $70.00 a month to spend on the soap and coffee she needs to function properly. Draw Amy's budget constraint, assuming the soap costs $3.50 per bottle, and the coffee costs $14.00 a pound. Also assume that Amy spends all of her money on either soap or coffee or some combination of both. Every time Amy buys a pound of coffee, she is giving up the opportunity to buy… Quantity of SoapQuantity of Coffee0123456789101112131415161718192001234567891011121314151617181920 Every time Amy buys a pound of coffee, she is giving up the opportunity to buy 4 bottles of soap 10 bottles of soap 8 bottles of soap 2 bottles of soap 6 bottles of soap
Amy is in school learning to weld. She spends long hours studying (and drinking coffee), and long hours welding in the hot, dirty shop (and therefore takes frequent showers). Amy has $70.00 a month to spend on the soap and coffee she needs to function properly. Draw Amy's budget constraint, assuming the soap costs $3.50 per bottle, and the coffee costs $14.00 a pound. Also assume that Amy spends all of her money on either soap or coffee or some combination of both.
Every time Amy buys a pound of coffee, she is giving up the opportunity to buy…
Answer:
Given,
Total income of Amy=$70.00
Price of soap=$3.50 per bottle
Price of coffee=$14.00 a pound
Calculation:
On the budget line the following equality will hold:
The following figure shows the budget constraint:
According to the above figure the x-axis measures the quantity of coffee and the y-axis measures the quantity of soap. AK is the budget line that shows different combinations of coffee and soap that Amy can purchase.
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