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Back in Spring 2020 Jerry was buying only two goods: good 1 is toilet paper, with quantity t and good 2 is hand sanitizer, with

Back in Spring 2020 Jerry was buying only two goods: good 1 is toilet paper, with quantity t and good 2 is hand sanitizer, with quantity h. Jerry's income is $60. 


(a) Suppose normally toilet paper costs $5 and sanitizer costs $3. Plot Jerry's budget line. Can Jerry afford bundle (10; 3)?[the first number is the quantity of toilet paper]. Can Jerry's optimal bundle be (13; 0)?



(b) Now the pandemic strikes and toilet paper and sanitizer are hard to find. Store A has a lot of toilet paper at $5 each but only allows maximum two sanitizers per customer, at $3 each. Store B has both toilet paper and sanitizer in stock but charges $6 for toilet paper and $5 for sanitizer. On the same graph, plot Jerry's budget set if he goes to store A and his budget set if he goes to store B. Plot an example indifference curve such that if Jerry had such preferences he would prefer buying from store A and another example indifference curve for which he would prefer store B

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a For Jerrys budget line for normal prices The equation for Jerrys budget line is 60 5t 3h Rewrite t... blur-text-image

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