Sean budgets $30 per week for transportation. To get around, he can either drive his car (D) take the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB). Sean's Transportation Budget a. Driving 15 10 5 5 10 15 Bus Write down Sean's budget constraint given the information above. Graph the budget constraint as well using the graph above. Be sure to label it as BCI on the graph. b. Instead of paying per ride, Sean can also buy a weekly pass. The weekly pass costs a flat fee of $10 and is good for 7 rides. If Sean chooses to use the bus for any rides beyond those seven, he faces the normal price of $2/ride. Write down Sean's Budget constraint and graph it using the same figure above. Label as BC2. [Hint: Remember, Sean only pays the flat fee if he takes any trips, it does not apply if he only uses his car!]

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
Sean budgets $30 per week for transportation. To get around, he can either drive his car (D) or
take the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB).
Sean's Transportation Budget
a.
Driving
15
10
5
5
10
15
Bus
Write down Sean's budget constraint given the information above. Graph the budget
constraint as well using the graph above. Be sure to label it as BCI on the graph.
b. Instead of paying per ride, Sean can also buy a weekly pass. The weekly pass costs a flat
fee of $10 and is good for 7 rides. If Sean chooses to use the bus for any rides beyond
those seven, he faces the normal price of $2/ride. Write down Sean's Budget constraint
and graph it using the same figure above. Label as BC2. [Hint: Remember, Sean only
pays the flat fee if he takes any trips, it does not apply if he only uses his car!]
Transcribed Image Text:Sean budgets $30 per week for transportation. To get around, he can either drive his car (D) or take the city bus (B). The cost/trip for driving is $5 (PD) while the cost/trip for the bus is $2 (PB). Sean's Transportation Budget a. Driving 15 10 5 5 10 15 Bus Write down Sean's budget constraint given the information above. Graph the budget constraint as well using the graph above. Be sure to label it as BCI on the graph. b. Instead of paying per ride, Sean can also buy a weekly pass. The weekly pass costs a flat fee of $10 and is good for 7 rides. If Sean chooses to use the bus for any rides beyond those seven, he faces the normal price of $2/ride. Write down Sean's Budget constraint and graph it using the same figure above. Label as BC2. [Hint: Remember, Sean only pays the flat fee if he takes any trips, it does not apply if he only uses his car!]
c. Compare BC1 to BC2 when Sean takes more than 7 bus rides. Should BC2 remind you of
how budget constraints evolve when income changes or when one of the prices changes?
Why?
d. Based on Sean's preferences, he only wishes to ride the bus once per week (i.e., B =1). If
we assume that his preferences are rational, will Sean buy the weekly pass or no? Be
sure to explain why or why not.
Transcribed Image Text:c. Compare BC1 to BC2 when Sean takes more than 7 bus rides. Should BC2 remind you of how budget constraints evolve when income changes or when one of the prices changes? Why? d. Based on Sean's preferences, he only wishes to ride the bus once per week (i.e., B =1). If we assume that his preferences are rational, will Sean buy the weekly pass or no? Be sure to explain why or why not.
Expert Solution
Step 1

Given , 

Total Income  = 30 

Price of Driving = 5

Price of Bus ride = 2 

Budget constraint or budget line is the combination of both the alternatives which can be exercised by the consumer given a constraint .

 

steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Budget Constraint
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education