--%>
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 : Define Executive Order Executive Order

    Executive Order (EO): It is a budget document, issued by the Department of Finance, asking for the State Controller’s Office to make an adjustment in their accounts. The adjustments are usually authorized by the Budget Act provision language, Bu

    		•
  • Q : Define Financial Controls Financial

    Financial Controls: Any measure of how fine a company or department controls its costs, at times stated as how far beneath or over budget it is. Financial controls are a critical portion of any financial system. They make sure that the resources are b

    		•
  • Q : Explain Equity Financing Equity

    Equity Financing: New or small businesses might find it hard to get debt financing therefore they turn to equity funding. The Equity financing frequently comes from non-professional investors like family, friends, or employees. This can as well come f

    		•
  • Q : Describe Reappropriation

    Reappropriation: The expansion of an appropriation’s accessibility for encumbrance and/or expenses beyond its set annihilation date and/or for a new point. Re-appropriations are usually authorized by statute for 1-year at a time however might be

    		•
  • Q : Microeconomics or macroeconomics Denote

    Denote whether each of statements applies to microeconomics or macroeconomics: a. In Canada, the unemployment rate was 7.0 percent in January 2005. b. A Canadian software firm d

    		•
  • Q : Describe the status of cyclically

    Assume the full-employment, non-inflationary level of real output is GDP3 (not GDP2). If the economy is operating at GDP2 instead of GDP3, describe the status of its cyclically adjusted budget? The status of its present fiscal polic

    		•
  • Q : How the production of public goods will

    Normal 0 false false

    		•
  • Q : What can financial institution do for a

    What can a financial institution frequently do for a deficit economic unit (DEU) which it would have complexity doing for itself if the DEU were to deal directly with an SEU?SEUs typically desire to supply a small amount of funds, while DEUs typ

    		•
  • Q : Describe significance of excess reserves

    Normal 0 false false

  • Q : What is an Initiative Initiative : The

    Initiative: The power of electors to propose statutes or Constitutional amendments and to accept or reject them. An initiative should be limited to a single subject and be filed with the Secretary of State with the suitable number of voter signatures

    		•