Question
A.Suppose Sandra have a fixed income of $400 to spend only on the consumption of bread and Pepsi.The price of a loaf of bread is
A.Suppose Sandra have a fixed income of $400 to spend only on the consumption of bread and Pepsi.The price of a loaf of bread is $200 and the price of a Pepsi is $100.
a)Write down the algebraic equation for Sandra's budget constraint
b)Graph Sandra's budget showing the decrease in the price of bread from $200 to $160 in the space below. On the graph,label axes,intercepts and the slope.
c)What is the opportunity cost of Bread for Sandra at the new price of $160
d)Given that Sandra spends all her income on the two (2) products, Bread and Pepsi. The marginal utility for the last unit of bread is 500 utils and that of Pepsi is 400 utils. When price of Bread is $200 and the price per unit of Pepsi is $100 explain what should Sandra do to maximized her utility
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