Draw some hypothetical indifference curves for John Q. Public on a diagram identical to the one you constructed for Test Yourself Question 1. a. Approximately how much gasoline and how many hot dogs will Mr. Public buy? b. How will these choices change if his income increases to $140? Is either good an inferior good? c. How will these choices change if gasoline price rises to $3.00 per gallon?
Draw some hypothetical indifference
Public on a diagram identical to the one you constructed
for Test Yourself Question 1.
a. Approximately how much gasoline and how many
hot dogs will Mr. Public buy?
b. How will these choices change if his income increases
to $140? Is either good an inferior good?
c. How will these choices change if gasoline
to $3.00 per gallon?
Test Yourself Question 1:
John Q. Public spends all of his income on gasoline and
hot dogs. Draw his budget line under several conditions:
a. His income is $100, and one gallon of gasoline and
one hot dog each cost $2.
b. His income is $150, and the two prices remain the
same.
c. His income is $100, hot dogs cost $2 each, and
gasoline costs $2.50 per gallon.
(See photo of answers for question #1)
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