1. Jose has $15 to spend this week on apple juice and cookies.
Juice costs %0.5 per bottle, and cookies cost $2.00 each.
a) Express Jose's budget constraint algebraically.
b) suppose the additionally, Jose faces the contraint that he cannot consume more than 20 bottles of juice per week. Graph his feasible set.
c) suppose instead that Jose can get a bottle of juice for free after every ten bottles of juice purchased. Graph his feasible set.
d) suppose instead that if Jose purchases at least 4 cookies he only pays $1 for the additional cookies.Graph his feasible set.
e) suppose instead that Jose gets one free bottle of juice with each cookies purchased.Graph his feasible set.
f) suppose instead that Jose gets five bottles of Juice each week, regardless of how many cookies he purchases. Graph his feasible set.
2. Al has $800 this month to spend on food and clothes. A meal(X) costs $10 and a unit of clothes (Y) costs $20. (Assume that Al can buy fractions of meals and clothes and that Al cant save money until next month)
1) Write down the expression for Al's budget constraint. 2) Draw Al's budget set. 3) What is the slope of the budget line? What does it mean? Now suppose that the local department store offers the following special: 75% off all purchases of clothes over $200.
1) How many units of clothes will Al have to buy before getting the 75% discount? 2) At what point does the budget constraint have a kink? 3) What is the slope of the budget line when Al buys only 3 units of clothes? What is the slope of the budget line when Al buys 20 units of clothes? Why are they different? 4) What is the highest number of units of clothes that Al can buy? 5) Draw Al's budget set.