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Wendy drinks 1 0 sugary drinks and 4 smoothies a week. Smoothies are $ 5 each and sugary drinks were $ 2 each. This week,

Wendy drinks 10 sugary drinks and 4 smoothies a week. Smoothies are $5 each and
sugary drinks were $2 each. This week, things are different: the government has slapped
a tax on sugary drinks and their price has doubled to $4. But its not all bad news for
Wendy. The government has also revised the income tax, so Wendys drinks budget has
increased. She can now just afford to buy her usual 10 sugary drinks and 4 smoothies a
week.
a. What was Wendys drinks (sugary drinks and smoothies) budget last week and
what is it this week.
b. What was Wendys opportunity cost of a sugary drink last week and what is it
this week?
c. Does Wendy buy 10 sugary drinks and 4 smoothies this week? Explain.
d. Draw Wendys budget line for drinks for last week by taking smoothies on
vertical axis and sugary drinks on horizontal axis. What is the slop of budget
line?
e. Draw Wendys budget line for drinks for this week on the same graph. How the
new budget line is different from the old one.

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