Question
Violet buys pies (good 1) and champagne (good 2) with her income of $100. The price of champagne is p 2 = $5 per bottle.
Violet buys pies (good 1) and champagne (good 2) with her income of $100. The price of champagne is p2 = $5 per bottle. Draw her budget constraints in each of the following cases assuming that both goods are divisible. Note that since pies is good 1, you should represent the quantity of pies in the horizontal axis.
(a) Pies cost $5 per pie if she buys between zero and 10 pies, and $4 per pie if she buys more than 10 pies.
(b) Pies cost $5 per pie if she buys between zero and 10 pies; if she buys more than 10 pies, each additional pie or (fraction thereof) is half-price, i.e., p1 = $2.5.
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To draw Violets budget constraint in each case well use the equation p1Q1p2Q2Mp1Q1p2Q2M Where p1p1 i...Get Instant Access to Expert-Tailored Solutions
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Health Economics
Authors: Jay Bhattacharya, Timothy Hyde, Peter Tu
1st Edition
113702996X, 978-1137029966
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