Answer to Question #125680 in Microeconomics for Ilyas khan

Question

Ali optimal choice at pizzeria is one pizza and two colas at given prices and income. The pizzeria
announces a special: All pizzas after the first one are half-price. Show the original and new
budget constraint. What can you say about the bundle Ali will choose when faced with the new
constraint?

Answer 1

After the pizzeria announces a special, the optimal consumption of pizza will increase, and consumption of cola will decrease. So, the budget constraint will shift to the right on the pizza axis and to the left on the cola axis.