Harry Hype has $5,000 to spend on advertising a new kind of dehydrated sushi. Market research shows that the people most likely to buy this new product are recent recipients of MBA degrees and lawyers who own hot tubs. Harry is considering advertising in two publications, a boring business magazine and a trendy consumer publication for people who wish they lived in California.
FACT 1: Ads in boring business magazines cost $500 each and the ads in the consumer magazine cost $250 each.
FACT 2: Each ad in the business magazine will be read by 1,000 recent MBAs and 300 lawyers with hot tubs.
FACT 3: Each ad in the consumer publication will be read by 300 recent MBAs and 250 lawyers who own hot tubs.
FACT 4: Nobody reads more than one ad, and nobody who reads one magazine reads the other.
(a) Draw a budget constraint showing the combinations of number of reading by recent MBAs and by lawyers with hot tubs that he can obtain if he spends his entire advertising budget (put Lawyers on the x-axis and MBAs on the y-axis). Clearly label the numbers associated with the points of interest on the budget constraint.
(b) Let M stand fro the number of instances of an ad being read by an MBA and L stand for the number of instances of an ad being read by a lawyer. What is the equation of the line segment in the budget constraint in these terms?
(c) With a Öxed advertising budget, how many readings by MBAs must he sacriÖce to get an additional reading from a lawyer with a hot tub.