--%>
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 : What is Carryover Carryover : The

    Carryover: The unencumbered equilibrium of an appropriation which continues to be obtainable for expenditure in years following to the year of enactment. For illustration, when a three-year appropriation is not completely encumbered in the first year,

    		•
  • Q : Fiscal policy Normal 0 false false

    Normal 0 false false

    		•
  • Q : Financial Account & International fund

    Question: The Financial Account captures international fund flows due to i._____. ii. Briefly Explain? Answer: (i)    Purchase and selling of assets (ii)   The Financial Account captures th

    		•
  • Q : What is Local Assistance Local

    Local Assistance (LA): The character of expenditures prepared for the support of local government or other locally administered actions.

    		•
  • Q : Advantages-disadvantages of internal

    Describe advantages and disadvantages of the internal rate of return method? The internal rate of return method is discounted cash flow method and number expressed like a percentage. Typically these are seen as advantages. The main disadvantag

    		•
  • Q : Explain Budget—Program or Traditional

    Budget—Program or Traditional: A program budget states the operating plan in terms of the costs of activities (that is, programs) to be undertaken to attain particular goals and objectives. A traditional (or object of expenses) budget expresses

    		•
  • Q : What is Make-Buy Analysis Make-Buy

    Make-Buy Analysis: Business decision which compares the costs and advantages of manufacturing a product or product component alongside purchasing it. When the purchase price is high than what it would cost the manufacturer to prepare it, or when the m

    		•
  • Q : Explain the term Continuous

    Continuous Appropriation: The constitutional or statutory expenses authorization that is renewed each year without additional legislative action. The amount obtainable might be particular, recurring sum each year; all or a specified part of the procee

    		•
  • Q : What is Operating Expenses and Equipment

    Operating Expenses and Equipment (OE&E): This is a class of a support appropriation which comprises objects of expenditure like general expenses, communication, printing, travel, data processing, tools, and accessories for the equipment.

    		•
  • Q : Describe primary reasons that companies

    Describe primary reasons that companies hold cash? Companies hold cash to make essential payments, to take benefit of opportunities as they arise, and to cover unforeseen emergencies.

    		•