Question

Notice that some of the questions (a, b, c, d) include several steps to solve the problem.

No utility function was provided for this problem. However, it's supposed to be solvable anyway.

5. Sarah the graduate student lives off ravioli, R, and microwave burritos, B. After subtracting her rent from her graduate student salary, Sarah finds that she only has $60 a week left over to buy food. The price of ravioli is $1 per serving, and the price of microwave burritos is $2 per serving. Both ravioli and burritos are normal goods. a. Write the equation for Sarah's weekly food budget constraint and then graph it with B on the vertical axis and R on the horizontal. Be careful to label axes and show intercepts. b. Show what happens to Sarah's budget constraint if the price of ravioli rises to $3 per serving. c. Construct the demand curve for ravioli by graphing three different ravioli prices and quantities consumed in ravioli-burrito space (using indifference curves and budget constraints) and then trace out the demand curve by connecting various ravioli price and quantity points. Place the indifference curve-budget line plot on top of the demand curve plot. d. Show the income and substitution effects that occur for an increase in the price of ravioli on a new graph of indifference curves and budget lines.

It won't let me leave a comment so I'm gonna ask the question here (and hope that you see it). Is it possible for you to do the parts of the problem that doesn't require the indifference curve?

Answer 1

In the given question Sarah after paying the rent from her graduate salary found that she is left out with only $60 for an entire week. Within this amount she has to manage the purchase of Raivolis and Microwave Burritos. At this stage, Budget constraint occurs since she is limited in the consumption patterns with a small amount.
Burritos = 42 (a) Budget Constraint is the prime element of utility maximization concept and illustrates the different Combinations of Goods and services that consumers can afford within the given in come Price of Raivoli = $1. Price of Microwave). 19 Amount that Sarah has = $60. Amount spent on Raivoli- IR Amount spent on Burritos = 2B Budget Constraint is a set of Combinations of Raioli and Burritos that can be purchased with $60. Hence the Budget Constraint equation will be: LB + IR = 60 To graph the budget constraint, who have to find out where it hits the axes first. It the entire amount of is spent on Raivli and not burritos, the consumar can buy 60% = 60 Raivoks. The x-intercept is 160,0) on the graph. Similarly, if the entire amount is spent on Burritas, the Consumer can buy 60/2 = 3o Burritos. Therefore, the -y- intercept is (0, 30) on the graph. รอก หอคอน : 10 20 30 40,5 Ralrei

(6) If the price of Raivoli increases to 23 per serving the buget Constraint equation will become 2B + 3R = 60 Now, i f the entire amount is spent on Raivoli, the consumer can buy 60 - 20 Raivolis. Ielence, the budget constraint Graph will change as follows : Vertical intercept (y) = (0,30) Horizontal intercept (x) = (20,0) Microw are Pourritos To 20 30 40 50 60 > Raivoli