Suppose Matt’s income is $120. He plans to spend it on two goods bread and avacado. Prices are: Pb = $4 per loaf of bread, Pa = $1 per avocado If Matt spends all his income on loafs of bread, how many does he buy? If Matt spends all his income on avocadoes, how many does he buy? If Matt buys 10 loaf of bread, how many avocados can he buy?
Suppose Matt’s income is $120. He plans to spend it on two goods bread and avacado. Prices are: Pb = $4 per loaf of bread, Pa = $1 per avocado If Matt spends all his income on loafs of bread, how many does he buy? If Matt spends all his income on avocadoes, how many does he buy? If Matt buys 10 loaf of bread, how many avocados can he buy?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose Matt’s income is $120. He plans to spend it on two goods bread and avacado. Prices are: Pb = $4 per loaf of bread, Pa = $1 per avocado
- If Matt spends all his income on loafs of bread, how many does he buy?
- If Matt spends all his income on avocadoes, how many does he buy?
- If Matt buys 10 loaf of bread, how many avocados can he buy?
- Plot each of the bundles from parts A – C on a graph that measures avocadoes on the horizontal axis and loaves of bread on the vertical axis, connect the dots to find Matt’s budget constraint.
- Show what happens to the budget constraint if his income falls to $100, (prices do not change).
- Show what happens to the budget constraint if
price of avocado rises to Pa = $2 per avocado, (income and price of loaves of bread did not change).
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