Please refer to the following information to answer the question (in bold) below: • You have $300 allocated for spending on a composite good (Y) and car washes (CW). • The price of the composite good is normalized at $1 (Py = $1). • There are two options for purchasing car washes for your car. o Option 1: Pay per car wash, at $20/wash (Pcw = $20). o Option 2: Buy a 10-car wash value pack for $150. Any additional car wash, beyond the included 10 washes, costs you $20/car wash. Let's say you are setting up your budget constraint under the assumption that you purchase the 10 car wash value pack. Which of the following expressions represents the piece of the budget constraint when CW - 10. OY 100-20CW OY= 150-20CW Y 350 20CW OY 500-20CW
Please refer to the following information to answer the question (in bold) below: • You have $300 allocated for spending on a composite good (Y) and car washes (CW). • The price of the composite good is normalized at $1 (Py = $1). • There are two options for purchasing car washes for your car. o Option 1: Pay per car wash, at $20/wash (Pcw = $20). o Option 2: Buy a 10-car wash value pack for $150. Any additional car wash, beyond the included 10 washes, costs you $20/car wash. Let's say you are setting up your budget constraint under the assumption that you purchase the 10 car wash value pack. Which of the following expressions represents the piece of the budget constraint when CW - 10. OY 100-20CW OY= 150-20CW Y 350 20CW OY 500-20CW
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Please refer to the following information to answer the question (in bold) below:
• You have $300 allocated for spending on a composite good (Y) and car washes (CW).
• The price of the composite good is normalized at $1 (Py= $1).
• There are two options for purchasing car washes for your car.
o Option 1: Pay per car wash, at $20/wash (Pcw = $20).
o Option 2: Buy a 10-car wash value pack for $150. Any additional car wash, beyond the included 10
washes, costs you $20/car wash.
Let's say you are setting up your budget constraint under the assumption that you purchase
the 10 car wash value pack.
Which of the following expressions represents the piece of the budget constraint when CW
> 10.
Y = 100 - 20CW
Y = 150-20CW
Y = 350 - 20CW
Y = 500-20CW
Expert Solution
Step 1
The price of composite good Y is 1
Price of a car wash (if CW<10) is 20 per wash and if CW=10, the car wash cost is 150 and beyond the included 10 washes, 20 per car wash.
Consumer total income =$300
General equation of budget constraint:
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