Question

Рx Sketch the following budget constraints: Income S20 $1,000 $40 $50 $1,000 $20 $100 $1,000 $20 $50 $2,000 $0.25 $0.25 $7.00 $0.251 $0.50 $7.00 $0.50 $0.25 $7.00 HINT: a. For these problems, graphing is as simple as determining how much of each good X and Y you can buy by dividing your income by the price of each. For a., you can buy 50 of good X because income/Px $1000/20 = 50. Along the same lines you can buy $1000 / 50 = 20 units of product Y. Of course, if you spend all your money on one good, you can buy zero of the other, so you can plot the number maximum units of X you can buy on the X-axis, and the maximum units of Y you can buy on the Y-axis and just draw a line between the two. That's it-you've drawn a budget constraint! Example below:

Answer 1

a) If all the income spend on good X, 50 units of good X can be purchased (i.e.,1000 / 20 = 50) and 0 unit of good Y.

If all the income spend on good Y, 20 units of good Y can be purchased (i.e.,1000 / 50 = 20) and 0 unit of good X.

25 15 BC at 1000 10 0 0 20 30 40 50 60 Good X 10 20 n A poo

b) If all the income spend on good X, 25 units of good X can be purchased (i.e.,1000 / 40 = 25) and 0 unit of good Y.

If all the income spend on good Y, 20 units of good Y can be purchased (i.e.,1000 / 50 = 20) and 0 unit of good X.

25 15 BC at 1000 10 0 5 10 15 20 25 30 Good X Ln 20 n A poo

c) If all the income spend on good X, 50 units of good X can be purchased (i.e.,1000 / 20 = 50) and 0 unit of good Y.

If all the income spend on good Y, 10 units of good Y can be purchased (i.e.,1000 / 100 = 10) and 0 unit of good X.

   

12 10 BC at 1000 4 2 0 0 10 20 30 40 50 60 Good X st A poos

d) If all the income spend on good X, 100 units of good X can be purchased (i.e.,2000 / 20 = 100) and 0 unit of good Y.

If all the income spend on good Y, 40 units of good Y can be purchased (i.e.,2000 / 50 = 40) and 0 unit of good X.

45 40 35 30 25 20 BC at I 2000 15 10 0 0 20 60 80 100 120 Good X 40 A poos

e) If all the income spend on good X, 28 units of good X can be purchased (i.e.,7 / 0.25 = 28) and 0 unit of good Y.

If all the income spend on good Y, 28 units of good Y can be purchased (i.e.,7 / 0.25 = 28) and 0 unit of good X.

32 28 16 BC at I 7 12 4 0 0 4 8 12 16 20 24 28 32 Good X st 24 st A poos

f) If all the income spend on good X, 25 units of good X can be purchased (i.e.,7 / 0.25 = 28) and 0 unit of good Y.

If all the income spend on good Y, 14 units of good Y can be purchased (i.e.,7 / 0.50 = 14) and 0 unit of good X.

16 14 12 10 8 BC at I 7 6 4 2 0 0 2 4 6 8 14 16 18 20 22 24 26 Good X 30 28 12 10 st st A poo

g) If all the income spend on good X, 14 units of good X can be purchased (i.e.,7 / 0.50 = 14) and 0 unit of good Y.

If all the income spend on good Y, 28 units of good Y can be purchased (i.e.,7 / 0.25 = 28) and 0 unit of good X.

30 28 26 24 22 20 18 16 14 BC at I 7 12 10 8 6 4 2 0 0 2 4 6 14 16 Good X 12 10 co. st A poop