Question

4. Tom eats Doritos and pretzels (the only kinds of snacks that he likes). He decides to budget $52.50 a month for these snacks. Suppose that one bag of Doritos costs $3.50, while one bag or pretzels costs $1.50. Let y denote the quantity of Doritos and x denote the quantity of pretzels that Tom purchases. a. What is the expression for Tom’s budget constraint? b. Draw a fully labeled graph of Tom’s budget line. Clearly indicate at what value the budget line crosses each axis in your graph. Label this budget line BL1. c. Show graphically how Tom’s budget line changes if the price of pretzels increases to $1.75 (while the price of Doritos stays at $3.50). Clearly indicate at what value the budget line crosses each axis in your graph. Label this budget line BL2. d. Show graphically how Tom’s budget line changes if, instead, the price of Doritos decreases to $2.50 (while the price of pretzels stays at $1.50). Clearly indicate at what value the budget line crosses each axis in your graph. Label this budget line BL3. e. Suppose Tom decides to increase his monthly budget for these snacks to $60. Coincidentally, the next time he goes to the grocery store, he learns that Doritos are on sale for $3.00 for the rest of the month, while pretzels are on sale for $1.25 for the rest of the month. Show graphically what happens to Tom’s budget line. Clearly indicate at what value the budget line crosses each axis in your graph. Label this budget line BL4.

Answer 1

a. $ 3.50X + $1.50 Y = $52.50 b. BLI If he spends all his money on dorritos x = $52.50 = 15 $3.50 If he spends all his money on Pretzels 4- $52.50 - 35 $1.50

төTS

st-13 og o'Z9$ = А то лh m том х о трах ме 1 09'$ 9 = 0'z = x 5олор мо титм и по 5pmdѕ + osts $ = hя 13 + 0s &$ 78

But BL2 30 35

d BL3 $2.50+$1.50 = $52.50 If he spends all his money on downtos - X= $52.50 = 21 $2.50 If he spends all his money on peretzels Y = $52.50 - 35 $1.50 BL3 BLI 35

oh 70zh4 Ma hau 09:15 o $ = А 5 g Pido огт} = a9 $ = x унтар на улиали 5 то краdѕ у FT 09 $ = SZ:1 + oo's - 78

hot GE 119 BLA

BL4 BL3 B22 Bli 30 35 404