Suppose Dina has a yearly budget of $120 to spend on seltzer water and peanut butter. Seltzer water is priced at $2 per case, and
Suppose Dina has a yearly budget of $120 to spend on seltzer water and peanut butter. Seltzer water is priced at $2 per case, and peanut butter is priced at $6 per jar. If Dina spends her entire $120 on seltzer water, she can buy 60 cases of seltzer water. If she spends her entire $120 on peanut butter, she can buy 20 jars of peanut butter. Use the blue line (circle symbol) to plot Dina's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of seltzer water and peanut butter that are affordable for Dina. Finally, place the black point (plus symbol) on the point on Dina '5 budget constraint that corresponds to a scenario in which Dina spends $60 on each good. Note: Dashed drop lines will automatically extend to both axes. 120 O 110 100 BC, ($120) 90 0 80 Affordable Region 70 60 PEANUT BUTTER (Jars) 50 $60 on Each 40 A 30 20 O BC, ($240) 10 0 O 0 10 20 30 40 50 60 70 80 90 100 110 120 SELTZER WATER (Cases)What does the slope of Dina's budget constraint represent? The cost of an additional case of seltzer water in terms of dollars The opportunity cost of an additional jar of peanut butter in terms of cases of seltzer water The cost of an additional jar of peanut butter in terms of dollars The opportunity cost of an additional case of seltzer water in terms of jars of peanut butter Suppose Dina receives $120 from her relative and decides to commit this money to purchasing more seltzer water and peanut butter. Using the green line (triangle symbol), draw Dina's new budget constraint on the preceding graph. True or False: Dina faces a new tradeoff between seltzer water and peanut butter. True False
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