Tutorial assignment 1 Due at the beginning of your week 2 tutorial 1. Budget Constraint. Antonio buys 8 new college textbooks during his first year at school at a cost of $50 each. Assume that he buys only new books. Used books cost only $40 each. When the bookstore announces that there will be a 20-percent price increase in new texts and a 10-percent increase in used texts for the coming year, Antonio’s father offers him $80 extra. Is Antonio better off or worse off after the price change? (Hint: draw Antonio’s budget lines before and after the price increase.) Now suppose Antonio was also buying some old books before the price increase. Does your answer change? 2. Budget Constraint. Rashid is a frequent flier with a major airline. His fare is reduced by 25 percent after he flies 30 000 km per year and then to 50 percent after he flies 60 000 km per year. Draw Rashid’s budget constraint. 3.
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This note was uploaded on 04/14/2010 for the course E&B 309013097 taught by Professor Oleksiibirulin during the Three '10 term at University of Sydney.