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She has no specific proportion that she must consume Lassos and baseball in . In 2 0 2 2 , the price of baseball was

She has no specific proportion that she must consume Lassos and baseball in. In 2022, the price of baseball was $4 per baseball, and Sue purchased 100 baseballs. She also purchased 10 lassos at a price of $10 a lassos.

Question 1; Sketch an indifference curve/budge line diagram that illustrates this situation with baseball on the horizontal (X) axis and lassos on the vertical axis(Y) axis. Be sure to include Sues budge constrains in 2022(including intercept) and her indifference curve in 2022(assuming she is a utility maximizer). What is Sues income this year?

Question 2; in 2023 the price of baseballs falls to $2 per baseball while Sue's income is unchanged. Please add on to your sketch in part (a) to include Sue's budget constraint in 2023(with intercepts). While you will not be able to find an exact bundle amount, indicate an appropriate utility maximizing consumption bundle in 2023 and draw in the utility/indifference curve. You can redraw the graph in (a) below and add in the 2023 budget constraint and utility curve or you may add to your graph in part (a).Question 3; Assume that baseballs are a normal good. What does this assumption imply about how many baseballs Sue purchases in 2023(after the price decrease)? Be sure to discuss the substitution and income effects in your answer.Question 4: Suppose in 2024, Sue decides to share her good fortune (due to the decrease in the price of baseballs) by giving her retired father a gift of $200, thus decreasing her income by $200. The price of baseballs remains at $2 and the price of lassos remains at $10.Draw the new budget constraint (you can redraw the graph below or denote it on the graph in (a) or (b)). Make sure to label the new intercepts. Note: If you redraw the graph, make sure to also put both budget constraints and indifference curves in 2022 and 2023 from parts a and b.

Question 5: Given that in 2024 the price of baseballs is $2 a baseball and the price of lassos is $10 a lasso and Sue gives $200 to her father, would Sue be able to consume at the same consumption bundle as she did in 2022? 
Will she choose to do so? Can she obtain a higher utility at a different consumption point while still consuming with in her budget? Explain your answer. 
 

 

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