Answer to Question #151627 in Microeconomics for Daveline

Question

Tomas lives on sweet potatoes and green bananas, the price per lb of sweet potatoes (ps) is 1.50 and the price of lb of green bananas (pg) is 2.00 his income is 1500 per month but only allocates 30.00 for food consumption.

A) identify tomas budget constraint equation and illustrate his budget line on a graph

B) if the price of sweet potatoes increases to 10% ,illustrate the effects and state the new budhet constraint equation.

C) calculate the price of sweet potatoes assuming that he allocates 50% of his budget when the price was 1.50 and 70% when the price increse.

Answer 1

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