Maya earns $1,000 dollars a month and spends her income on clothing and books. Suppose the price
Question:
a. Show Maya’s budget constraint in a diagram. Identify the slope and intercepts of this budget constraint.
b. Suppose the price of books rises to $50, Maya’s income remains $1,000, and the price of clothing remains $25. Draw a new diagram that shows Maya’s new budget constraint. Identify the slope and intercepts of this budget constraint.
c. Now suppose the price of books had remained at $40 but the price of clothing had fallen to $20 and Maya’s income had fallen to $800. Draw a new diagram that shows Maya’s new budget constraint. Identify the slope and intercepts of this budget constraint.
d. Compare the budget constraints you drew to answer parts b and c of this question.
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a The original budget constraint is b The new budget ...View the full answer
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