Question $1$

Suppose a consumer has an entertainment budget of $50$ to spend on entrance tickets to

live concerts or stand$-$up comedy shows. The live concert costs $10$ and the comedy show

costs $5.$

a$)$ Write down the consumers' budget constraintand draw all the combinations for concert

visits and comedy shows that the consumer can afford. Plot concert visits on the x$-$axis

and comedy shows on the y$-$axis.

b$)$ What is the interpretation of the slope of the budget line?

c$)$ What happens to the budget line if the price of comedy show visits increases to $10$ but

the price of concert visits remains constant?

d$)$ What happens if the consumer gets a pay raise and can now spend $$150$ on concerts or

comedy shows? The price of concert tickets is still $10$ and comedy shows is $5.$

Question $2$

If the income of the consumer increases and the price of commodity $1$ increases at the same

time, will the consumer necessarily be at least as well off? Illustrate you answer with the

help of a diagram in which commodity $1$ is on the $x-$axis.

Question $3$

Imagine you consumer two goods: bread and pyjamas. You have a budget of $100.$ Bread

costs $5$ per loaf and pyjamas cost $50.$ Draw the budget line with bread on the $x-$axis.Question $1$

Suppose a consumer has an entertainment budget of $50$ to spend on entrance tickets to

live concerts or stand$-$up comedy shows. The live concert costs $10$ and the comedy show

costs $5.$

a$)$ Write down the consumers' budget constraintrand draw all the combinations for concert

visits and comedy shows that the consumer can afford. Plot concert visits on the $x-$axis

and comedy shows on the y$-$axis.

b$)$ What is the interpretation of the slope of the budget line?

c$)$ What happens to the budget line if the price of comedy show visits increases to $10$ but

the price of concert visits remains constant?

d$)$ What happens if the consumer gets a pay raise and can now spend $$150$ on concerts or

comedy shows? The price of concert tickets is still $10$ and comedy shows is $5.$