Andre has a salary of $1000. He spends his entire budget on shoes and beers. The cost for a pair of shoes is $15 and the cost for can of beer is $25. i. Construct Andre’s budget constraint (place) beers on the y-axis. ii. Suppose Andre’s salary rises by 25%. Also suppose that the price of shoes and beers each rise by 40%. Construct Andre’s new budget constraint. What is the difference between the new and old budget constraints?
Andre has a salary of $1000. He spends his entire budget on shoes and beers. The cost for a pair of shoes is $15 and the cost for can of beer is $25. i. Construct Andre’s budget constraint (place) beers on the y-axis. ii. Suppose Andre’s salary rises by 25%. Also suppose that the price of shoes and beers each rise by 40%. Construct Andre’s new budget constraint. What is the difference between the new and old budget constraints?
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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a. Andre has a salary of $1000. He spends his entire budget on shoes and beers.
The cost for a pair of shoes is $15 and the cost for can of beer is $25.
i. Construct Andre’s budget constraint (place) beers on the y-axis.
ii. Suppose Andre’s salary rises by 25%. Also suppose that the price of
shoes and beers each rise by 40%. Construct Andre’s new budget
constraint. What is the difference between the new and old budget
constraints?
iii. Suppose that the price of beers fell from $25 per beer to $15. Construct
Andre’s new budget constraint. What is the difference between the new
and old budget constraints.
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