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 bu�ffet at Fuji Chef instead. The buff�et 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)
To sketch the new budget constraint, we need to represent the possible combinations of cans of soda and sushi rolls that can be purchased with the new budget.
Let's assume that the x-axis represents the number of cans of soda (C) and the y-axis represents the number of sushi rolls (R).
Initially, with a budget of $20, we can calculate the maximum number of sushi rolls that can be purchased:
Maximum number of sushi rolls = budget / cost per sushi roll = 20 / 6 = 3.33 (approximately)
However, since we cannot purchase a fractional number of sushi rolls, the maximum number of sushi rolls that can be purchased is 3.
Next, let's calculate the maximum number of cans of soda that can be purchased:
Maximum number of cans of soda = budget / cost per can of soda = 20 / 1 = 20
So, with the initial budget, the combination of cans of soda and sushi rolls would lie on the line connecting the points (0, 20) and (3, 0) on the graph.
Now, considering the new scenario of going to the buffet at Fuji Chef, where the buffet costs $13, the remaining budget for purchasing cans of soda will be:
Remaining budget = Initial budget - buffet cost = $20 - $13 = $7
Using this remaining budget of $7, the maximum number of cans of soda that can be purchased is:
Maximum number of cans of soda = remaining budget / cost per can of soda = 7 / 1 = 7
So, in the new scenario, the combination of cans of soda and sushi rolls would lie on the line connecting the points (0, 7) and (3, 0) on the graph.
To sketch the new budget constraint, draw a line connecting these two points on the graph. This line represents the combinations of cans of soda and sushi rolls that can be purchased with the new budget.