Suppose Matt’s income is $120. He plans to spend it on two goods bread and avacado. Prices are: Pb = $4 per loaf of bread, Pa = $1 per avocadoIf Matt spends all his income on loafs of bread, how many does he buy?If Matt spends all his income on avocadoes, how many does he buy?If Matt buys 10 loaf of bread, how many avocados can he buy?Plot each of the bundles from parts A – C on a graph that measures avocadoes on the horizontal axis and loaves of bread on the vertical axis, connect the dots to find Matt’s budget constraint.Show what happens to the budget constraint if his income falls to $100, (prices do not change).Show what happens to the budget constraint if price of avocado rises to Pa = $2 per avocado, (income and price of loaves of bread did not change). loaves of bread302010020406080100120Quantity of Avocadoes

The combination of goods and services that a consumer can receive for his or her limited budget is…

Answered: Suppose Matt’s income is $120. He plans…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Matt’s income is $120. He plans to spend it on two goods bread and avacado. Prices are: P_b = $4 per loaf of bread, P_a = $1 per avocado

If Matt spends all his income on loafs of bread, how many does he buy?
If Matt spends all his income on avocadoes, how many does he buy?
If Matt buys 10 loaf of bread, how many avocados can he buy?
Plot each of the bundles from parts A – C on a graph that measures avocadoes on the horizontal axis and loaves of bread on the vertical axis, connect the dots to find Matt’s budget constraint.
Show what happens to the budget constraint if his income falls to $100, (prices do not change).
Show what happens to the budget constraint if price of avocado rises to P_a = $2 per avocado, (income and price of loaves of bread did not change).

loaves of bread
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Quantity of Avocadoes

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