Question
Suppose that Joe has an income of $480 per month to purchase food and clothing. The price of food is $10 per meal, and the
Suppose that Joe has an income of $480 per month to purchase food and clothing. The price of food is $10 per meal, and the price of clothing is $12 per article. At his optimal consumption bundle Joe decides to purchase 30 meals and 15 articles of clothing. One day, Joe sees that a local discount store (CostCo) advertises a deal. He can become a member of the store for $ 120 per month. As a member, Joe's price for food will be $9 and his price for clothing will be $6. Should Joe join, (Hint: draw your budget lines in the same graph and assume a set of "typical" indifference curves).
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