Consider an Individual...

Question 1. (a) consider an individual with $40 to spend on 2 goods, x and y. The price of x is 5. The slope of the budget constraint is -1.25. What is the price of y? Sketch the budget constraint and choice set, labelling your graph and indicating the intercepts. Now suppose it takes 0.75 hours of online searching to find each unit of x and 1 hour to find each unit of y. An individual has 10 hours total to search for purchases. What is the maximum number of x and y this person can find in that time? Sketch the time constraint and indicate the choice set for both money and time. Show your work. (b) consider an individual with $100 deciding over two goods, x and y. The price of x is $5 and the price of y is 10. Instead of a constant $5 per unit of x, the local stores have only 8 units to sell at that price. If the individual wants to buy more than 8 units, they have to buy online at the higher price of $12 including shipping. Sketch the budget constraint, clearly labelling the slope(s), maximum amounts of x and y that can be purchased and the choice set. Show your work