--%>
Assignment Help - homework help

Question on budget line

On a Lotto Canada ticket A person won $15 at the local 7-Eleven & decided to spend all the winnings money on bags of peanuts and candy bars. The cost of candy bars= $.75 and the cost of peanuts = $1.50.

a. In general, how would he decide which of the obtainable combinations of candy bars and bags of peanuts to buy?

b. Assume that he had won $30 on your ticket, not $15. Illustrate the $30 budget line in your diagram. Why would this budget line is preferable to the old one?

 

 

E

Expert

Verified

(a) The decision of how much of each to purchase would involve weighing the marginal benefits & marginal costs of the several alternatives.  If, for instance, the marginal benefits of moving from alternative C to alternative D are greater than the marginal costs, then this consumer have to move to D (and then compare again to E, and so forth, until MB=MC is obtained).

(b)

1360_budget line.png

The budget line at $30 would be preferable since it would let greater consumption of both goods.

 

 

   Related Questions in Finance Basics

  • Q : Explain computing of payback period How

    How do we compute the payback period for proposed capital budgeting project? What are the basic criticisms of the payback method? We compute the payback period for proposed project through adding a project's positive cash flows, one period at t

    		•
  • Q : Define Special Funds Special Funds :

    Special Funds: For legal base budgeting purposes, funds produced by statute, or administratively per Government Code Section 13306, employed to budget and account for taxes, licenses, and fees which are restricted by law for specific activities of the

    		•
  • Q : Define Grants Grants : It is generally

    Grants: It is generally used to explain amounts of money received by an organization for a particular purpose however with no obligation to repay (that is, in contrast to a loan, though the award might stipulate the repayment of funds under some situa

    		•
  • Q : Describe the bird in the hand theory of

    Describe the bird in the hand theory of cash dividends. The bird in the hand dividends theory says that dividends attained now are better than a promise of future dividends. Uncertainty is resolved while a dividend is paid.

    		•
  • Q : Types of legal barriers to market entry

    Types of legal barriers to market entry exist: Kinds of legal barriers which make that difficult for the newer drug in the generic form towards entering market have been lack of the rigorous assessment about the patentability needs; thirty mouth stay

    		•
  • Q : Describe depreciation expense Describe

    Describe depreciation expense as it seems on the income statement.  Accounting depreciation is the allocation of asset's primary cost over time. Depreciation cost on an income statement is the amount of the asset=s initial cost allocated to

    		•
  • Q : Define Subcommittee Subcommittee : The

    Subcommittee: The smaller groupings into which the Senate or Assembly committees are frequently divided. For illustration, the fiscal committees which hear the Budget Bill are classified into subcommittees usually by departments or subject area (examp

    		•
  • Q : What is Detail of Appropriations and

    Detail of Appropriations and Adjustments: A budget display, for each association, that replicates appropriations and adjustments by fund source for each of the character of expenditure, (that is, State Operations, Local Assistance, and Capital Outlay)

    		•
  • Q : Graphically combined transactions and

    Normal 0 false false

  • Q : What is an Agency Agency: It is a legal

    Agency: It is a legal or official reference to a government association at any level in the state organizational hierarchy. Or Government organizations belong to the highest sta

    		•