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budgets $30 per week for transportation. To get around, he can either drive his car (D) the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB). Sean's Transportation Budget Driving 15 10 5 5 10 15 Bus a. Write down Sean's budget constraint given the information above. Graph the budget constraint as well using the graph above. Be sure to label it as BC1 on the graph.

budgets $30 per week for transportation. To get around, he can either drive his car (D) the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB). Sean's Transportation Budget Driving 15 10 5 5 10 15 Bus a. Write down Sean's budget constraint given the information above. Graph the budget constraint as well using the graph above. Be sure to label it as BC1 on the graph.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I would appreciate if you could solve all the questions. If not, please solve C) and D). Thanks.

Sean budgets $30 per week for transportation. To get around, he can either drive his car (D) or take the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB). Sean's Transportation Budget a. Driving 15 10 5 5 10 15 Bus Write down Sean's budget constraint given the information above. Graph the budget constraint as well using the graph above. Be sure to label it as BCI on the graph. b. Instead of paying per ride, Sean can also buy a weekly pass. The weekly pass costs a flat fee of $10 and is good for 7 rides. If Sean chooses to use the bus for any rides beyond those seven, he faces the normal price of $2/ride. Write down Sean's Budget constraint and graph it using the same figure above. Label as BC2. [Hint: Remember, Sean only pays the flat fee if he takes any trips, it does not apply if he only uses his car!]
Transcribed Image Text:Sean budgets $30 per week for transportation. To get around, he can either drive his car (D) or take the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB). Sean's Transportation Budget a. Driving 15 10 5 5 10 15 Bus Write down Sean's budget constraint given the information above. Graph the budget constraint as well using the graph above. Be sure to label it as BCI on the graph. b. Instead of paying per ride, Sean can also buy a weekly pass. The weekly pass costs a flat fee of $10 and is good for 7 rides. If Sean chooses to use the bus for any rides beyond those seven, he faces the normal price of $2/ride. Write down Sean's Budget constraint and graph it using the same figure above. Label as BC2. [Hint: Remember, Sean only pays the flat fee if he takes any trips, it does not apply if he only uses his car!]
c. Compare BC1 to BC2 when Sean takes more than 7 bus rides. Should BC2 remind you of how budget constraints evolve when income changes or when one of the prices changes? Why? d. Based on Sean's preferences, he only wishes to ride the bus once per week (i.e., B =1). If we assume that his preferences are rational, will Sean buy the weekly pass or no? Be sure to explain why or why not.
Transcribed Image Text:c. Compare BC1 to BC2 when Sean takes more than 7 bus rides. Should BC2 remind you of how budget constraints evolve when income changes or when one of the prices changes? Why? d. Based on Sean's preferences, he only wishes to ride the bus once per week (i.e., B =1). If we assume that his preferences are rational, will Sean buy the weekly pass or no? Be sure to explain why or why not.
Expert Solution
Step 1

Given , 

Total Income  = 30 

Price of Driving = 5

Price of Bus ride = 2 

Budget constraint or budget line is the combination of both the alternatives which can be exercised by the consumer given a constraint .

 

 

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