Jim buys only milk and cookies.
a. In year 1, Jim earns $100, milk costs $2 per quart, and cookies cost $4 per dozen. Draw Jim's budget constraint.
a. Figure 12 shows Jim's budget constraint. The vertical intercept is 50 quarts of milk,
since if Jim spent all his money on milk he would buy $100/$2 = 50 quarts of it.
The horizontal intercept is 25 dozen cookies, since if Jim spent all his money on
cookies he would buy $100/$4 = 25 dozen cookies.
b. If Jim's salary rises by 10 percent to $110 and the prices of milk and cookies rise by
10 percent to $2.20 and $4.40, Jim's budget constraint would be unchanged. Note
that $110/$2.20 = 50 and $110/$4.40 = 25, so the intercepts of the new budget
constraint would be the same as the old budget constraint. Since the budget
constraint is unchanged, Jim's optimal consumption is unchanged.
I need this answer
Oh, Jim and his delicious choices! Let me entertain you with an informative (yet silly) drawing of Jim's budget constraint:
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$$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$$$$$$$$
|-------|-------|
2q of M 1d of C
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In this masterpiece, we have the vertical axis showing money and the horizontal axis showing quantities of milk (M) and cookies (C).
Using the given prices, we can see that Jim's budget constraint forms a straight line. It starts at $100 on the vertical axis and intersects the vertical axis at $50 (Jim must spend some money on milk or cookies).
Also, Jim can buy up to 25 quarts of milk ($50 divided by $2) or 12.5 dozens of cookies ($50 divided by $4). As a lover of milk and cookies, Jim must always budget wisely!
I hope this silly representation brings some joy to your economics journey!
To draw Jim's budget constraint, we need to plot the various combinations of milk and cookies that he can buy with his income.
Let's start by calculating the maximum amount of milk and cookies Jim can buy with his $100 income.
The cost of milk is $2 per quart, so the maximum number of quarts of milk Jim can buy is $100 / $2 = 50 quarts.
The cost of cookies is $4 per dozen. Since there are 12 cookies in a dozen, Jim can buy $100 / $4 = 25 dozens of cookies.
Now, let's plot these combinations on a graph where the x-axis represents the quantity of milk and the y-axis represents the quantity of cookies:
- At point (0, 0), Jim is not buying any milk or cookies.
- At point (50, 0), Jim is buying 50 quarts of milk and no cookies.
- At point (0, 25), Jim is buying no milk and 25 dozens of cookies.
Connecting these points will give us Jim's budget constraint.
To draw Jim's budget constraint, we need to understand his income and the prices of milk and cookies.
Given information:
- Income in year 1: $100
- Cost of milk: $2 per quart
- Cost of cookies: $4 per dozen
First, let's calculate the maximum amount of milk and cookies Jim could buy with his income.
Maximum milk units:
Jim's income divided by the cost of milk.
$100 / $2 = 50 quarts
Maximum cookie units:
Jim's income divided by the cost of cookies.
$100 / $4 = 25 dozens
To draw the budget constraint, we need to create a graph with quantities on the X-axis and values on the Y-axis.
Let's assume the X-axis represents the quantity of milk, and the Y-axis represents the quantity of cookies.
Plotting the points:
1. Plot the point (50, 0) - representing Jim buying 50 quarts of milk and 0 dozens of cookies.
2. Plot the point (0, 25) - representing Jim buying 0 quarts of milk and 25 dozens of cookies.
Connect these two points with a straight line. This line represents Jim's budget constraint, showing the combinations of milk and cookies that Jim can afford with his given income.
Note: If Jim decides to spend his entire income on either milk or cookies, he can buy either 50 quarts of milk or 25 dozens of cookies, respectively.