Problem :
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?
Problem :
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.
Problem :
J.P.'s indifference curves for beer and movies look like this:
Beer costs $4 and movies cost $6. If J.P. has $24, how much of each
will he buy?
If you draw in J.P.'s budget constraint, you can see that the
optimal point would be at about 2 movies and 3 beers.
Problem :
Draw the indifference curves for cashmere sweaters and moth-eaten
sweaters (assuming that moth-eaten sweaters are undesirable and cashmere
sweaters are desirable).
Problem :
Lawrence is looking for tables and chairs. His indifference curves
look like this:
He has $500 to spend, how many tables and chairs will he buy if chairs
cost $50 and tables cost $100?
If you draw in Lawrence's budget constraint, you can see that his
optimal combination would be about 3 tables and 4 chairs.