Economic Theory on Utility
1- Suppose a person has $8 to spend only on apples and bananas. Apples cost $.40 each, and bananas cost $.10 each.
a- If this person buys only apples, how many can be bought?
b- If this person buys only bananas, how many can be bought?
c- If the person were to buy 10 apples, how many bananas could be bought with the funds left over?
d- If the person consumes one less apple (that is, nine) how many more bananas could be bought? Is this rate of trade-off the same no matter how many apples are relinquished?
e- prepare down the algebraic equation for this person's budget constraint, and graph it showing the points mentioned in parts a through d