contestada

Jacob buys only milk and cookies.


a. in year 1, jacob earns $100, milk costs $2 per quart, and cookies cost $4 per dozen. draw jacob's budget constraint.


b. now suppose that all prices increase by 10 percent in year 2 and that jacob's salary increases by 10 percent as well. draw jacob's new budget constraint. how would jacob's optimal combination of milk and cookies in year 2 compare to his optimal combination in year 1?

Respuesta :

jepessoa

Answer:

A) With $100 Jacob can buy:

  • if he buys only milk, he will be able to buy 50 quarts
  • if he buys only cookies, he will be able to buy 25 dozens

B) if Jacob's salary increases by 10% but the prices of both milk and cookies increase also by 10%, his optimal combination will not change:

Jacob's new salary  is $110, milk's new price is $2.20 and cookies new cost is $4.40

  • if he buys only milk, he will be able to buy 50 quarts
  • if he buys only cookies, he will be able to buy 25 dozens

Ver imagen jepessoa

Otras preguntas