Write down James budget constraint| Business Economics

Write down James budget constraint| Business Economics

If she spends all of her income on uglifruits and breadfruits, Maria can just afford 11 uglifruits and 4 breadfruits per day. She could also use her entire budget to buy 3 uglifruits and 8 breadfruits per day. The price of uglifruits is 6 pesos each. How much is Maria’s income per day?

Clara spends her entire budget and consumes 5 units of x and 13 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 13 units of y, what is the largest number of units of x that she can afford?

Lars consumes only potatoes and herring. When the price of potatoes was 9 crowns per sack and the price of herring was 5 crowns per crock, he spent his entire income to buy 5 sacks of potatoes and 10 crocks of herring per month. Now the government subsidizes potatoes. Market prices haven’t changed, but consumers get a subsidy of 5 crowns for every sack of potatoes consumed. To pay for this subsidy, the government introduced an income tax. Lars pays an income tax of 20 crowns per month. If s is the number of sacks of potatoes and c is the number of crocks of herring, what is Lars’s new budget equation?

Your budget constraint for the two goods A and B is 12A  4B  I, where I is your income. You are currently consuming more than 27 units ofB. In order to get 3 more units of A, how many units of B would you have to give up?

The Chuzzlewits have an income of $m per week. Let x be food and let y be all other goods. Let px be the price of food and py be the price of other goods. They can use food stamps to buy food at a price of px(1 – s) for up to x* units of food per week. If they buy more food than x*, they have to pay the full price px for additional units. Their weekly income is greater than px(1 – s)x*. The maximum amount of food that they can buy per week is (SHOW YOUR WORK)

x* + (m/px).

(m + x*)/px.

(m/px) + sx*.

m/(1 – s)px.

(m + px)/(1 – s)px.

Brenda likes hot dogs and Coca-Cola. Hot dogs cost $1 each and Cokes cost $.50 per bottle. There is a special promotion for Coke that will last for one month. If Brenda sends in the bottle tops from the Cokes she drinks during the next month, she will get a refund of $.20 for every bottlecap beyond the first 12 that she returns. For example, if she returns 25 bottle caps she will get back $2.60  $.20 (25  12). Brenda has $40 to spend on hot dogs and Coke during the next month. Draw her budget line with Coke on the horizontal axis and hot dogs on the vertical axis. Find the points where the budget line hits the axes and the

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point where it has a kink. At each of these three points write down the quantities of each good consumed.

12. Suppose James has an income of m=$300/month, and 𝑃 = $30 and

𝑃 = $50. 𝑐𝑙𝑜𝑡h𝑖𝑛𝑔

A) Write down James budget constraint and draw it in a graph with food on the horizontal axis and clothing on the vertical axis. Identify the intercepts with the horizontal and vertical axis and the slope of the line.

B) James is notified that due to his low income he is entitled to 50 food stamps per month (each food stamp enables him to purchase one unit of food). Draw his new budget constrain in the same graph you drew in part A. Identify any new intercepts or slopes

C) James realizes by chatting to a friend that he is able to sell the food stamps in the black market for $20/stamp. Draw his new budget constraint in the same graph. Identify any new intercepts or slopes.

D) Let’s go back to part A (there are no food stamps anymore). Government imposes a new 8% sales tax on food and clothing. Draw James’ budgetconstrain before and after the introduction of sales tax.

E) Show that this sales tax is equivalent to an income tax levied at rate 8% . 1+8%

13. Julie has an income of m=$200. She only consumes Coke and potato chips and buys them from Greenway (𝑝 = $2 𝑎𝑛𝑑 𝑃 = $5). To encourage

𝑐𝑜𝑘𝑒 𝑐h𝑖𝑝ð‘

healthy eating, Greenway introduces a price penalty for purchasing more than 10 cans of Coke. Anyone who buys more than 10 cans of Coke pays an additional 50 cents for any additional can of Coke purchased over 10. Draw Julie budget constraint before and after the introduction of price penalty. Identify all the different slopes and intercepts in the graph.

14.Suppose Jamal has a monthly income of $100. He consumes two commodities, Coke and chips. The price of Coke is $4 per can for the first 20 cans purchased, and then drops to $2 for cans purchased over 20. The price of chips is $3 per bag for the first 10 bags, and then drops to $1 for bags purchased over 10. Draw Jamal’s budget constraint on a graph with Coke on the horizontal axis and chips on the vertical axis.