Question
Elon Musk enjoys reading books and Dogecoin. Supposing that Elon makes $5000/day through his various enterprises and spends all his money only on these two
Elon Musk enjoys reading books and Dogecoin. Supposing that Elon makes $5000/day through his various enterprises and spends all his money only on these two goods, please answer the following:
If the price of books is $10/each and the price of Dogecoin is $0.20/each, draw
Elon's budget constraint, being sure to indicate on your diagram the maximum
number of each good that he can buy in a day.
Suppose that Elon purchases 225 books and 12,500 Dogecoin, show this point on
your diagram from part a and add an indifference curve illustrating this choice.
What can you infer about Elon and his choice?
Now suppose that the price of books decreases to $8/each. Draw Elon's new
budget constraint and his new optimal consumption of books and Dogecoin (i.e. use an indifference curve to show his new optimal choice) on the same graph as part b, assuming that he spends all of his money.
Finally, assume that SpaceX starts offering commercial flights to the moon, increasing Elon's daily income to $6500/day, show how this would alter his budget constraint and his optimal consumption (i.e. use an indifference curve to show his new optimal choice) of books and Dogecoin if books are back to being $10/each. (hint: you may want to use a fresh graph for this one as your graph from a-c is probably hard to read by now)
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