1. Consider the market for bananas. Show and!explain what happens to consumer and producer surplus in the banana market if a cyclone!destroys 50% of the banana farms in Australia (assume we do not import bananas).
2. Consider Scott who buys two goods - shoe and t-shirts. The price of shoes is $30 per pair and the price of t-shirts is $25 each. Scott has a budget of $300.
a. Draw Scott's budget constraint,
labeling all the relevant points.
b. What is the opportunity cost of a pair of shoes?
c. What is the opportunity cost of a t-shirt?
d. If the price of a t-shirt doubles:
i. What happens to Scott's!budget constraint - draw and explain.
ii. What happens to the opportunity cost of shoes and t- shirts - explain.
iii. Is Scott better or worse off? Explain
Does anyone answer these questions ? If you answer how much do you need?