A sports facility with a budget of $240 faces prices of $6 per basketball and $5...

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A sports facility with a budget of $240 faces prices of $6 per basketball and $5...

A sports facility with a budget of $240 faces prices of $6 per basketball and $5 per volleyball.

1) Draw the budget constraint.

2) In equilibrium, the sports facility purchases 8 basketballs and 16 volleyballs. Graph this Equilibrium assuming the standard shape for indifference curves.

Suppose the sports facility can join a sports equipment buyer’s club. For a $60 fee, they can purchase at the lower prices of $3 per basketball and $4 per volleyball.

3) On the same graph, in parts 1 and 2, draw the budget constraint for the sports facility in the buyers’ club.

4) Can they buy the same combination of goods purchased in part 2? Explain.

5 ) Should the sports facility join the buyers’ club?

6 ) Will the consumer’s optimal (utility-maximizing) combination of basketballs and volleyballs change? Why or why not?

business economics

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