Budget Constraint: (pictures of diagrams will be posted after submitting this)Suppose Naia has $150...

Question

Budget Constraint: (pictures of diagrams will be posted after submitting this)Suppose Naia has $150 to spend on movies and popcorn. A movie costs $10 and a bag of popcorn costs $5. (a) (3 points) Write down the formula for Naia’s budget constraint and graph the budget constraint with movies on the vertical axis and popcorn on the horizontal axis. (b) (3 points) Suppose Naia’s income has not changed but the movie theater offers a deal for movies and popcorn that changes her budget constraint. The new budget constraint is shown below. Describe the movie theater’s deal, with numbers. (c) (3 points) Suppose again that Naia has $150 to spend on movies and popcorn. A movie costs $10 and a bag of popcorn costs $5. Now the movie theater offers Naia 5 free movies. Graph her budget constraint. (Remember, budget constraints capture the maximum amount of goods she can get with her income. Trace out how many movies she can see if she eats no popcorn, 5 popcorns, 10 popcorns, and so on and so forth.) (d) (4 points) Suppose Naia’s income has not changed and the price of movies is fixed at $5. The movie theater now offers a deal on popcorn that changes her budget constraint. The new budget constraint is shown below. Describe the movie theater’s deal, with numbers.

Robert · Accepted Answer

1 
 
Suppose Naia has $150 to spend on movies and popcorn. A movie costs $10 and a bag of 
popcorn costs $5.  
(a) (3 points) Write down the formula for Naia’s budget constraint and graph the budget 
constraint with movies on the vertical axis and popcorn on the horizontal axis.  
Answer – Budget Constraint 
10M +5P = 150 
Where, M = number of movies 
P = Bags of popcorn
(b) (3 points) Suppose Naia’s income has not changed but the movie theater offers a deal for 
movies and popcorn that changes her budget constraint. The new budget constraint is shown 
below. Describe the movie theater’s deal, with numbers.
Answer – There is rise in the number of movies by (30-15) = 15 and fall in the number of 
Popcorns from 30 to 20, that is, by 10 units. Therefore, in the deal offered by the movie 
theatre,

Budget Constraint: (pictures of diagrams will be posted after submitting this)Suppose Naia has $150 to spend on movies and popcorn. A movie costs $10 and a bag of popcorn costs $5. (a) (3 points)...

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