Income S60 - 60 Peola 51 Pizza Income $60 Ppizza $10 5. Refer to Scenario#1. If the price of cola doubles to $3 while thec income and the price of pizza are constant, then the a. budget constraint intersects the vertical axis at 20 colas C. slope of the budget constraint rises to -2 b. budget constraint intersects the vertical axis at 30 colas d. budget constraint shifts inward in a parallel fashion

Income S60 - 60 Peola 51 Pizza Income $60 Ppizza $10 5. Refer to Scenario#1. If the price of cola doubles to $3 while thec income and the price of pizza are constant, then the a. budget constraint intersects the vertical axis at 20 colas C. slope of the budget constraint rises to -2 b. budget constraint intersects the vertical axis at 30 colas d. budget constraint shifts inward in a parallel fashion

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 1PA

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Consumer choiceJo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The priceof muffins is $1.25. The price of cupcakes is $1.75.a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of thequantity of muffins.b) Show Jo’s budget constraint on a graph. Let quantity of muffins be on the horizontal axis. Letquantity of cupcakes be on the vertical axis.c) Show the following consumption bundles (points) on the graph. Calculate the cost of eachconsumption bundle and state which one of them are feasible.• Point A: 49 muffins and 3 cupcakes.• Point B: 38 muffins and 15 cupcakes.• Point C: 24 muffins and 24 cupcakes.• Point D: 14 muffins and 30 cupcakes.d) Which of these four points can be Jo’s optimal consumption bundle? Why?e) The price of cupcakes decreased to $1.5. Provide an example of a consumption bundle thatbecame feasible now but wasn’t feasible before the decrease in price. Calculate the cost ofthis consumption bundle…