For lunch, Misha eats only salads or fruit & yogurt smoothies. Her weekly food budget is $48. Each salad costs $8 and each smoothie costs $3. a. Draw Misha’s budget constraint. b. What is the opportunity cost of purchasing one more smoothie? What is the opportunity cost of purchasing one more salad? c. Describe intuitively how Misha should make the optimal consumption decision. d. Suppose that Misha income falls from $48 to $24. Show what happens to the budget constraint. Is it possible that Misha will consume more salad as a result of this?

For lunch, Misha eats only salads or fruit & yogurt smoothies. Her weekly food budget is $48. Each salad costs $8 and each smoothie costs $3. a. Draw Misha’s budget constraint. b. What is the opportunity cost of purchasing one more smoothie? What is the opportunity cost of purchasing one more salad? c. Describe intuitively how Misha should make the optimal consumption decision. d. Suppose that Misha income falls from $48 to $24. Show what happens to the budget constraint. Is it possible that Misha will consume more salad as a result of this?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter20: Consumer Choice: Maximizing Utility And Behavioral Economics

Section20.1: Utility Theory

Problem 3ST

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