Question

Please answer question 2

uestion 1) 2 points . Suppose a person wants to allocate income () between two products H (on the horizontal axis) and S (on the vertical axis) are given: PH-1:Ps-8:1-100: a. Write the equation of the budget line b. Compute the horizontal intercept&write the interpretation of it c. Compute the vertical intercept& write the interpretation of it d. Compute the slope and write the interpretation of it Question 2) 2 points .Consider information in question 1 to be the baseline scenario. Now we want to create two changes and compare them to the baseline scenario Scenario 1 Government imposes a $0.50 tax on the per unit price of product H Scenario 2 The producers give a discount of $0.30 to consumers if H is purchased more than 60 units a. Find the equation of the budget line, slope, horizontal intercept, vertical intercept for b. scenario 1 Find the equation of the budget line, slope of Budget Line scenario 2 Draw two graphs: Graph 2.1 compares the baseline budget constraint to scenario 1 and Graph 2.2 compares the baseline budget constraint to scenario 2 c.

Answer 1

Given, pH = 1 and ps = 8 I, 100 Q.2 scenario 1: Govt imposes a $ 0.5 tax on the per unit price of H scenario 2: produces give a dis of $ 0.30 to consumers if H is purchased more than 60 units. A. eq^n of budget line in scene 1. 1.5 h + 8 s = 100 (The price of h is increased by $ 0.5 because of the tax introduced.) Horizontal intercept = 100/1.5 = 66.67 vertical intercept = 100/8 = 12.5 slope of the budget line = 1.5/8 = 0.1875 (slope of the budget line = Good on horizontal/Good on vertical axis) \r\n b. equation of budget line in scene 2. For units from 0 to 60 h + 8s = 100 For units from 61 and grater 0.7 + 8s = 77.5 slope of the budget line in scene 2 For units from 0 to 60 = 1/8 = 0.125 For units from 61 and greater = 0.0875 \r\n c. Graph for scene 1

(Please note the graphs have been drawn with a rough scale and not the exact scale.)