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Suppose Gary only consumes pizza and beer, and his income is $200. Originally, a 6-pack of beer costs $10, and each pizza costs $20. Eventually,
Suppose Gary only consumes pizza and beer, and his income is $200. Originally, a 6-pack of beer costs $10, and each pizza costs $20. Eventually, Gary is given a customer loyalty deal on pizzas, reducing the price of each pizza to $10. Below is the start of a graph that shows Gary's budget constraint before and after the pizza price reduction, along with his corresponding indifference curves and tangency points. a. Label the appropriate axes based on which one represents quantity of pizza consumed (Qp) and quantity of beer consumed (Qb). b. Label Gary's budget constraint at the original prices BC1. Label his budget constraint at the new prices BC2. c. Label the intercepts (i.e. end points) of both BC1 and BC2. d. What is the slope of BC1? What is the slope of BC2? e. Label his original indifference curve IC1 and his new indifference curve IC2. Label his original consumption bundle A and his new consumption bundle B
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