Question
Gotham is a New Yorker who rides the subway system. Each month Gotham spends $110 on his transportation costs, which include both subway rides and
Gotham is a New Yorker who rides the subway system. Each month Gotham spends $110 on his transportation costs, which include both subway rides and other types of transportation (such as cabs, rideshares, and buses). The price of a subway ride is $2.75 per ride.
a) Placing the number of subway rides on the x-axis and expenditure on other types of transportation on the y-axis illustrate Gotham's budget set. What is the opportunity cost of an additional subway ride in terms of other types of transportation?
b) If Gotham chooses to take 10 subway rides per month, then how much can he spend on other types of transportation? Suppose that his , at this basket is 8.25; then, is this the best basket on his budget line? If it is not his best basket, should he consume more or fewer subway rides? You may use a diagram to illustrate your answer
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