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The institutional research office has recently conducted a survey group of consumers.According to demographic data, the research office has given you...
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6. The institutional research office has recently conducted a survey

group of consumers.    According to demographic data, the research office has given you the following: 
                       Typical weekly consumer income                 $500
                       Price of Frosty Cola                                       $2.50 per case
                       Price of Coca-Cola                                        $5.00 per case


           You want to break this data down for the chief financial officer in two forms: a slope-intercept equation for the typical consumer's budget constraint and a graphical analysis showing him the typical consumer's budget set. The CFO has specifically asked for Frosty Cola to be the good on the vertical axis. 


           a) Put the equation for the budget constraint in slope-intercept form. 




b) Illustrate the typical consumer's budget set (again, place quantity of Frosty Cola on the vertical axis).




c) The CFO asks you if the price of Frosty Cola were to increase by $2.50 per case, what   would happen to the budget constraint? Illustrate and explain.


d) Lastly, the CFO asks you that if the typical consumer wished to purchase four cases of Coca- Cola, how much Frosty Cola could that individual purchase? Calculate and show using the slope-intercept equation from part a). Assume the original price of Frosty Cola and the original budget constraint.  

Step-by-step answer

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Subject: Business, Economics

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