• Draw a budget constraint and identify an opportunity set when given a budget and price of two goods.
• Identify whether a combination of goods falls within an individual's opportunity set.
• Identify the opportunity cost of one good in a two good budget constraint module.

For questions 1-4 consider the following scenario:

Mary is shopping for new clothes and has $200 to spend. A pair of pants costs $40 and a top costs $20.

Question 2

Determine if each of the following combinations are in Mary's opportunity set or not.

Three pairs of pants and two tops.

(a)In Mary's opportunity set

(b)Not in Mary's opportunity set

One pair of pants and eight tops.

(a)In Mary's opportunity set

(b)Not in Mary's opportunity set

Four pairs of pants and three tops

(a)In Mary's opportunity set

(b)Not in Mary's opportunity set

Question 3

Given Mary is only going to buy pants and tops, what is the opportunity cost of one pair of pants?

Question 4

Suppose there is a half off sale cutting the price of pants and tops in half.Knowing this, Mary also decides to cut her budget in half. What has happened to her opportunity set, does it get larger, smaller, or stay the same? Explain your answer.

Question 1 4 pts Draw the budget constraint to represent Mary's budget and the prices of pants and tops. Indicate the opportunity set on the graph. You may use the blank copy provided and ll in the blanks or draw your own from scratch. You may draw a digital version or you may do it by hand and scan/take a photo of your image and upload it here. Pants 10 Tops