Demand with perfect complements-what is slope of budget line
Business Economics
Problem associated with third video: demand with perfect complements
Mar ´ia lives in the beautiful country of Inflationlandia. She earns 30 million pesos a month. She only consumes hamburgers and buns. The price of a dozen hamburgers is 2 million pesos and the price of a dozen buns is 1 million pesos.
(a) Graph her budget set with dozens of hamburgers in the x axis and dozens of buns in the y axis.
(b) What is the slope of the budget line? Give an interpretation for this number.
(c) Tiring of having to deal with too many zeros in the peso bills the government decided to erase six zeros of every price and income. Graph her new budget set.
(d) Mar ´ia likes to eat each hamburger with one bun. She doesn’t like to eat hamburgers or buns alone. Graph her indifference curves that go through the following points (5,5), (10,10) and (15,15).
(e) Find a utility function that represents her preferences. (f) Given her income and the prices of hamburgers and buns, what will she buy?
