Last week Sara’s income was $12 a week. The price of popcorn was $3 a bag, and the price of a smoothie was $3. a. Calculate Sara’s real income in terms of smoothies and her real income in terms of popcorn. b. What is the relative price of smoothies in terms of popcorn? c. What is the opportunity cost of a smoothie?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Last week Sara’s income was $12 a week. The price of popcorn was $3 a bag, and the
price of a smoothie was $3.
a. Calculate Sara’s real income in terms of smoothies and her real income in terms of
popcorn.
b. What is the relative price of smoothies in terms of popcorn?
c. What is the opportunity cost of a smoothie?
d. Calculate the equation for Sara’s budget line (with bags of popcorn on the left side).
e. Draw a graph of Sara’s budget line with the quantity of smoothies on the x-axis.
f. What is the slope of Sara’s budget line? What determines its value?

 

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