Econ 1: Tang
Fall Quarter 2007
Homework 4: Chapter 8
Due Wednesday November 14, at the beginning of class.
Please write your name, PID, and section number/TA name on your homework.
1. Suppose that Marvin is currently consuming 4 apples and 4 bananas. If the
price of apples is .25 and Marvin spends $6 on apples and bananas, then what is
the price of bananas?
2. Every morning Kristen buys a bagel and a cup of coffee from Peabody’s.
At
Peabody’s the price of bagels is $2.00 and the price of a cup of coffee is $1.00.
a.
Assuming that Kristen has $20 to spend on coffee and bagels, sketch her
budget constraint, putting coffee on the xaxis and bagels on the yaxis.
Clearly label a) the xintercept, b) the yintercept, c) and the slope of the
budget constraint.
b.
Now, suppose that Peabody’s wants to encourage customer loyalty.
To
do so they start the following program: every time someone purchases 10
cups of coffee, they get the 11
th
cup for free.
Sketch Kristen’s new budget
constraint under the assumption that she still has $20 to spend on coffee.
As above, put coffee on the xaxis and bagels on the yaxis.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '08
 TANG
 Randall

Click to edit the document details