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 increases to $1200, while Sophia’sincome and the price of the Thai restaurant are 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 increases to $1200, while Sophia’sincome and the price of the Thai restaurant are 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 price of evenings at MECA increases to $1200, while Sophia’s
income and the price of the Thai restaurant are unchanged from part (i).
Illustrate the new budget line in relation to the old
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