Answer the following questions. Make sure to number your answers when you upload your response. Suppose Alphonso’s town raised the price of bus tickets to $2.50 per trip (while the price of burgers stayed at $3.50 and his budget remained $11.50 per week.) Draw Alphonso’s new budget constraint. What happens to the opportunity cost of bus tickets?Suppose Alphonso’s town raises the price of bus tickets from $2.50 to $5 and the price of burgers rises from $3.50 to $7. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from $11.50 to $23. How is his budget constraint affected from all three changes? Explain.Use this information to answer the following 4 questions: Marie has a weekly budget of $24, which she likes to spend on magazines and pies.If the price of a magazine is $4 each, what is the maximum number of magazines she could buy in a week?If the price of a pie is $12, what is the maximum number of pies she could buy in a week?Draw Marie’s budget constraint with pies on the horizontal axis and magazines on the vertical axis. What is the slope of the budget constraint?What is Marie’s opportunity cost of purchasing a pie?Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way? Hint: Grocery stores provide weighing machines alongside cost per unit for raw agricultural commodities. Consumers read product labelling before making choices. Consumers compare active ingredients between generic and brand name goods. Consumers engage in private online research before making purchase decisions. For example webMD.

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Answered: Suppose Alphonso’s town raised the…

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Question

Answer the following questions. Make sure to number your answers when you upload your response.

Suppose Alphonso’s town raised the price of bus tickets to $2.50 per trip (while the price of burgers stayed at $3.50 and his budget remained $11.50 per week.) Draw Alphonso’s new budget constraint. What happens to the opportunity cost of bus tickets?
Suppose Alphonso’s town raises the price of bus tickets from $2.50 to $5 and the price of burgers rises from $3.50 to $7. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from $11.50 to $23. How is his budget constraint affected from all three changes? Explain.
Use this information to answer the following 4 questions: Marie has a weekly budget of $24, which she likes to spend on magazines and pies.

If the price of a magazine is $4 each, what is the maximum number of magazines she could buy in a week?
If the price of a pie is $12, what is the maximum number of pies she could buy in a week?
Draw Marie’s budget constraint with pies on the horizontal axis and magazines on the vertical axis. What is the slope of the budget constraint?
What is Marie’s opportunity cost of purchasing a pie?

Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way?

Hint:

Grocery stores provide weighing machines alongside cost per unit for raw agricultural commodities.
Consumers read product labelling before making choices.
Consumers compare active ingredients between generic and brand name goods.
Consumers engage in private online research before making purchase decisions. For example webMD.

Expert Solution