Answer to Question #309695 in Microeconomics for Stuwart

Question

Suppose that with a budget of $200, Deborah spends $120 on sushi and $80 on bagels when sushi costs $2 per piece and bagels cost $2 per bagel. Then, the price of bagels falls to $1 per bagel.

Answer 1

ANSWER

a)

Deborah spends money on sushi= $120

price of sushi = $2 per piece

The number of pieces of sushi consume is given by;

$=120\div 2$

$=60$

Deborah spends money on Bagels = $80

price of Bagels= $2 per Bagel

The number of Bagels consume is calculated as;

$=80\div 2$

$=40$

b)

When the price falls to $\$1$

The number of Bagels consumed is;

$=80\div 1$

$=80 \space Bagels$

Deborah would spend $ 40 of her money to buy the same quantity she spent when the price was $ 2 per Bagel.