Problem
Sarah consumes apples and oranges (these are the only fruits she eats). She has decided that her monthly budget for fruit will be $50. Suppose that one apple costs $0.25, while one orange costs $0.50.
a) What is the expression for Sarah's budget constraint?
b) Draw a graph of Sarah's budget line.
c) Show graphically how Sarah's budget line changes if the price of apples increases to $0.50.
d) Show graphically how Sarah's budget line changes if the price of oranges decreases to $0.25.
e) Suppose Sarah decides to cut her monthly budget for fruit in half. Coincidentally, the next time she goes to the grocery store, she learns that oranges and apples are on sale for half price, and will remain so for the next month; that is, the price of apples falls from $0.25 per apple to to $0.125 per apple, and
the price of oranges falls from $0.50 per orange to $0.25 per orange. What happens to the graph of Sarah's budget line?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.