Problem 1: Budget set with coupons Bob goes to the supermarket to buy milk and cereal. He has $20 to spend. A consumption bundle consists of a quantity of milk, x (liters), and a quantity of cereal, y (grams). For all of the following questions you can assume that the consumption set is R2. This means that milk and cereal can be consumed in any non-negative quantity. = (a) The price of milk at the supermarket is px 4$/liter. The price of cereal is 0.2cents/gram. Draw Bob's budget set. What is the slope of the budget line? (b) Bob notices that the supermarket has a special coupon. A coupon states: "Buy 1 liter of milk and get 1 box of cereal for free". A box of cereal has 2000 grams of cereal in it. Each shopper is limited to one coupon. Draw Bob's budget set with 1 coupon. (Hint: Be careful with units again). (c) Due to popular demand, the supermarket extends its special of- fer. Each customer is now allowed to use 2 coupons. Draw Bob's 1
Problem 1: Budget set with coupons Bob goes to the supermarket to buy milk and cereal. He has $20 to spend. A consumption bundle consists of a quantity of milk, x (liters), and a quantity of cereal, y (grams). For all of the following questions you can assume that the consumption set is R2. This means that milk and cereal can be consumed in any non-negative quantity. = (a) The price of milk at the supermarket is px 4$/liter. The price of cereal is 0.2cents/gram. Draw Bob's budget set. What is the slope of the budget line? (b) Bob notices that the supermarket has a special coupon. A coupon states: "Buy 1 liter of milk and get 1 box of cereal for free". A box of cereal has 2000 grams of cereal in it. Each shopper is limited to one coupon. Draw Bob's budget set with 1 coupon. (Hint: Be careful with units again). (c) Due to popular demand, the supermarket extends its special of- fer. Each customer is now allowed to use 2 coupons. Draw Bob's 1
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 19SQ
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Transcribed Image Text:Problem 1: Budget set with coupons
Bob goes to the supermarket to buy milk and cereal. He has $20 to
spend. A consumption bundle consists of a quantity of milk, x (liters),
and a quantity of cereal, y (grams). For all of the following questions
you can assume that the consumption set is R2. This means that milk
and cereal can be consumed in any non-negative quantity.
=
(a) The price of milk at the supermarket is px 4$/liter. The price
of cereal is 0.2cents/gram. Draw Bob's budget set. What is the
slope of the budget line?
(b) Bob notices that the supermarket has a special coupon. A coupon
states: "Buy 1 liter of milk and get 1 box of cereal for free". A box
of cereal has 2000 grams of cereal in it. Each shopper is limited
to one coupon. Draw Bob's budget set with 1 coupon. (Hint: Be
careful with units again).
(c) Due to popular demand, the supermarket extends its special of-
fer. Each customer is now allowed to use 2 coupons. Draw Bob's
1
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