Critical Thinking:

Suppose your town raises the price of tickets from $0.50 to $1 and the price of tacos rises from $2 to $4. Why is the opportunity cost of bus tickets unchanged? Suppose your weekly spending money increases from $20 to $40. How is his budget constraint affected from all three changes? Explain.

Problems:

Use this information to answer the following 5 questions:

1) Julie has a weekly budget of $24, which she likes to spend on slurpees and hot dogs.

2) If the price of a slurpees is $3 each, what is the maximum number of slurpees she could buy in a week?

3) If the price of a hot dogs is $1, what is the maximum number of hot dogs she could buy in a week?

4) Draw Julie's budget constraint with hot dogs on the horizontal axis and slurpees on the vertical axis. What is the slope of the budget constraint?

5) What is Julie's opportunity cost of purchasing a hot dog?