Assume that Sophia has $1000 per month to spend between dinners at a Thairestaurant and evenings at MECA, a local club. Assume that going to MECAcosts $200 and eating at the Thai restaurant costs $100.i. Draw Sophia’s budget constraint. Restaurants on the Y axis. ii. Assume that Sophia’s income rises and she can now spend $2000 permonth. Draw her new budget constraint in relation to the old. iii. Suppose the price of evenings at MECA increase to $400, while Sophia’sincome and the price of the Thai restaurant is unchanged from part (i).Illustrate the new budget line in relation to the old
Assume that Sophia has $1000 per month to spend between dinners at a Thairestaurant and evenings at MECA, a local club. Assume that going to MECAcosts $200 and eating at the Thai restaurant costs $100.i. Draw Sophia’s budget constraint. Restaurants on the Y axis. ii. Assume that Sophia’s income rises and she can now spend $2000 permonth. Draw her new budget constraint in relation to the old. iii. Suppose the price of evenings at MECA increase to $400, while Sophia’sincome and the price of the Thai restaurant is unchanged from part (i).Illustrate the new budget line in relation to the old
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume that Sophia has $1000 per month to spend between dinners at a Thai
restaurant and evenings at MECA, a local club. Assume that going to MECA
costs $200 and eating at the Thai restaurant costs $100.
i. Draw Sophia’s budget constraint. Restaurants on the Y axis.
ii. Assume that Sophia’s income rises and she can now spend $2000 per
month. Draw her new budget constraint in relation to the old.
iii. Suppose the
income and the price of the Thai restaurant is unchanged from part (i).
Illustrate the new budget line in relation to the old
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