3 Budget Constraints
Freddy the Meek has $36 to spend on waffles W and French Toast F. The prices are $3 and $4, respectively.
(a) What is the budget constraint?
(b) How many more waffles does an additional dollar spent on W buy? How many more French Toasts does an additional dollar spent on F buy?
(c) Can Freddy afford the bundle (5, 5)? Can he afford the bundle (2, 8)?
(d) How many French Toasts does Freddy have to give up if he wants to buy 4 more waffles and keep spending constant?
(e) Currently Freddy plans to consume 4 waffles and 6 French Toasts. Then the prices rise by 10% for waffles and %40 for French Toast. How much additional income does Freddy need to consume the same amounts as before?