Jo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The price of muffins is $1.25. The price of cupcakes is $1.75. a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of the quantity of muffins. b) Show Jo’s budget constraint on a graph. Let quantity of muffins be on the horizontal axis. Let quantity of cupcakes be on the vertical axis. c) Show the following consumption bundles (points) on the graph. Calculate the cost of each consumption bundle and state which one of them are feasible. • Point A: 49 muffins and 3 cupcakes. • Point B: 38 muffins and 15 cupcakes. • Point C: 24 muffins and 24 cupcakes. • Point D: 14 muffins and 30 cupcakes
Consumer choice
Jo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The price
of muffins is $1.25. The price of cupcakes is $1.75.
a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of the
quantity of muffins.
b) Show Jo’s budget constraint on a graph. Let quantity of muffins be on the horizontal axis. Let
quantity of cupcakes be on the vertical axis.
c) Show the following consumption bundles (points) on the graph. Calculate the cost of each
consumption bundle and state which one of them are feasible.
• Point A: 49 muffins and 3 cupcakes.
• Point B: 38 muffins and 15 cupcakes.
• Point C: 24 muffins and 24 cupcakes.
• Point D: 14 muffins and 30 cupcakes.
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