a. Susan has the option to purchase eyeglasses, E, $3 each, and orange juice, O, $1 each. Her income is $24. i. Draw the budget line, with eyeglasses on the vertical axis, and orange juice on the horizontal axis, and compute the values of the intercepts. ii. What is the slope of the budget constraint? Are the following combinations of goods in the affordable set: (4E and 9O), (6E and 2O), (3E and 15O)? iii. Illustrate what happens to the budget line if the price of orange juice increases to $2.

a. Susan has the option to purchase eyeglasses, E, $3 each, and orange juice, O, $1 each. Her income is $24. i. Draw the budget line, with eyeglasses on the vertical axis, and orange juice on the horizontal axis, and compute the values of the intercepts. ii. What is the slope of the budget constraint? Are the following combinations of goods in the affordable set: (4E and 9O), (6E and 2O), (3E and 15O)? iii. Illustrate what happens to the budget line if the price of orange juice increases to $2.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 2CQQ

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