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Unformatted text preview: Micro Homework 1. Suppose Mary consumes only two goods: Pepsi and pizza. The price of a pizza pie is $10 and a six- pack of Pepsi costs $2. Marys total weekly income is $250. a) Draw Marys budget line. Please be sure to label the axes, the intercepts, and slope. b) Show what happens to her budget line when the price of a pizza increases by 10%. Make sure to label the new intercept and slope. c) Show what happens to Marys budget line if she gets a raise and her income increases to $300 (assume (b) never happened). Make sure to label the new intercepts. d) Pizza Hut is having a special deal: If you buy more than 4 pizzas, the price of a pizza decreases to $7. Please show Marys new budget line (assume (b) and (c) never happened). Make sure to label the intercepts and slopes. e) The government is concerned that Americans arent eating enough pizza. A new study says that eating a minimum of 5 pizzas a week is beneficial to your health. In order to encourage this healthy minimum a minimum of 5 pizzas a week is beneficial to your health....
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This note was uploaded on 03/23/2010 for the course ECON 023 taught by Professor John during the Spring '10 term at American Academy of Art.
- Spring '10