Econ 302

(12 points) Budget constraints Juliana, the representative consumer, is purchasing owers (f) and chocolate (0) for Valen- tine's day. A ower vendor at the local farmer's market is selling sunowers for $5 each, and another is selling milk chocolate in the shape of a heart for $3 each. (a) (b) (C) (4 points) Suppose Juliana has $45 to spend on the gift. Write an equation for her budget constraint, and arrange it into slope-intercept form with c as the dependent variable and f as the independent variable. Then graph the budget constraint with c on the vertical axis and f on the horizontal axis. Be sure to label the axes, intercepts, and slope. (4 points) Suppose that Juliana buys a card for $9, leaving her with $36 to spend on the rest of the gift. Draw a graph of Juliana's new budget constraint, again making sure to label the axes, intercepts, and slope. In a few sentences describe what happens to the slope and each of the intercepts? Do they change? Why or why not? (4 points) Suppose a storm destroys some of the sunower harvest, so the market price for them increases from $5 to $6. Juliana still has $36 available to spend and the price of chocolate is unchanged at $3. Draw a graph of Juliana's new budget constraint, again making sure to label the axes, intercepts, and slope. In a few sentences describe what happens to the slope and each of the intercepts? Do they change? Why or why not? Bonus: Suppose Juliana's mother gives her a gift card redeemable for 5 chocolate hearts (not owers, only chocolate) and all other values are the same as in part (c). Draw a graph of Juliana's new budget constraint, again making sure to label the axes, intercepts, and slope. In a few sentences describe what happens to the slope and each of the intercepts? Do they change? Why or why not