Options:i. A)the budget constraint experiences a parallel shift inward B)the budget constraint experiences a parallel shift outward C)the budget constraint rotates inward along the groceries axis D) the budget constraint rotates outward along the restaurant meals axisii) A)Steepens the slope of the budget constraint B)Flattens the slope of the budget constraint C)has no effect on the slope of the budget constraintiii) A)Yes, Bundle B is affordable B) No, Bundle B is unaffordable C) More information is needed to answer the question Please refer to the following information to answer the question (in bold) below:• You have $400 allocated for your monthly food budget.• You can either purchase meals at a restaurant (R) or buy groceries (G) to prepare food at home.• The price of restaurant meals is $8/meal (PR = $8).• The price of groceries is $2/pound of food (PG= $2).Reset the price of restaurant meals to $8/meal (Pr = $8). Due to losing hours at work, let'sassume your income falls. This causes your food budget to contract to $200/month. Answereach of the following questions related to the reduction of your food budget.i. Which of the following statements best describes the graphical impact on your budgetconstraint of the decrease in your grocery budget? [Select]ii. How does the decrease in your grocery budget impact the slope of your budgetconstraint? [Select]iii. Consider Bundle B: (G, F) = (50, 40). Can the consumer choose that bundle after thechange in their grocery budget? [Select]✪

Answered: Please refer to the following…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Options:

i. A)the budget constraint experiences a parallel shift inward B)the budget constraint experiences a parallel shift outward C)the budget constraint rotates inward along the groceries axis D) the budget constraint rotates outward along the restaurant meals axis

ii) A)Steepens the slope of the budget constraint B)Flattens the slope of the budget constraint C)has no effect on the slope of the budget constraint

iii) A)Yes, Bundle B is affordable B) No, Bundle B is unaffordable C) More information is needed to answer the question

Please refer to the following information to answer the question (in bold) below:
• You have $400 allocated for your monthly food budget.
• You can either purchase meals at a restaurant (R) or buy groceries (G) to prepare food at home.
• The price of restaurant meals is $8/meal (PR = $8).
• The price of groceries is $2/pound of food (PG= $2).
Reset the price of restaurant meals to $8/meal (Pr = $8). Due to losing hours at work, let's
assume your income falls. This causes your food budget to contract to $200/month. Answer
each of the following questions related to the reduction of your food budget.
i. Which of the following statements best describes the graphical impact on your budget
constraint of the decrease in your grocery budget? [Select]
ii. How does the decrease in your grocery budget impact the slope of your budget
constraint? [Select]
iii. Consider Bundle B: (G, F) = (50, 40). Can the consumer choose that bundle after the
change in their grocery budget? [Select]
✪

Expert Solution

Step 1

Initially, the food budget is $400 and price of a restaurant meal is $ 8 per meal, and the price of groceries is $2 per pound of food.

Equation of budget constraint:

$T o t a l b u d g e t = t o t a l e x p e n s e s o n r e s t a u r a n t m e a l + e x p e n s e s o n g r o c e r y F o o d b u d g e t = P_{R} R + P_{G} G . . . . . . . . . . (1) P u t t i n g v a l u e s 400 = 8 R + 2 G . . . . . . . . (2)$

Equation 2 represents the initial budget constraint.

Now the food budget falls to $200 per month.

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