Microeconomics: Budjet Constraint
posted by Johnson on .
You have decided to eat sushi for lunch and have a grand total of $20 to spend.
Whatever money you have left over from buying sushi rolls will be spent on cans of soda to get you through the rest of the day. Your problem is to choose the best combination of sushi rolls and cans of soda. A sushi roll (R) is $6 and cans of soda (C) are $1.
Now suppose that you decided to go to the buffet at Fuji Chef instead. The buffet costs $13. Sketch your new budget constraint. (Hint: your possible consumption bundles still consist of cans of soda and rolls of sushi.)
Take a shot, what do you think.
First two assumptions. I presume you cannot by fractional sushi rolls or cans of soda. So, hint: your first budget constraint will look like steps.
Second, I presume at the buffet, you can eat all the sushi rolls you want, and soda is not included. Here, hint: the budget constraint is a vertical line (or horizontal, depending on which axis has soda and which as sushi)
Sorry I should have said that fractional sushi rolls and cans of soda are possible. What I was thinking was, with soda on the vertical axis and sushi on the horizontal axis, we have a horizontal
line at $7 on the vertical axis. So basically a straight line down at (20,0) till 7, then a horizontal line.
To be more clear, (20,0) to (7,0)