Practice Problems
Problem 3.1:
Kate has $12. Pretzels cost $2 a bag, and soda costs $3 a bottle.
Draw her budget constraint. If soda goes on sale for $2 a bottle, what
does her new budget constraint look like?
[Solution]
Problem 3.2:
Jeannette has $300. DVD's cost $30 and CD's cost $15. Draw her
budget constraint for DVD's and CD's. Draw her budget constraint if
she has $360.
[Solution]
Problem 3.3:
J.P.'s indifference curves for beer and movies look like this:
J.P.'s Indifference Curves
Beer costs $4 and movies cost $6. If J.P. has $24, how much of each
will he buy?
[Solution]
Problem 3.4:
Draw the indifference curves for cashmere sweaters and moth-eaten
sweaters (assuming that moth-eaten sweaters are undesirable and cashmere
sweaters are desirable).
[Solution]
Problem 3.5:
Lawrence is looking for tables and chairs. His indifference curves
look like this:
Lawrence's Indifference Curves
He has $500 to spend, how many tables and chairs will he buy if chairs
cost $50 and tables cost $100?
[Solution]
