Miley cyrus under the conditions of a court order is


Miley Cyrus, under the conditions of a court order, is required to enroll Summer session at Kardashian College. She is granted $50 a week to spend: either on energy drinks at $2.50 each or on gasoline for her Bentley at $4.00 per gallon.

a) Draw Miley’s opportunity set. Label her feasible set. (Put gasoline on horizontal axis.)

(Suggestion: Draw a sufficiently large diagram as you will add more items to the same graph in subsequent parts.)

b) In part a), what is the trade-off (opportunity cost) of energy drinks in terms of gasoline?

c) In the graph for part a) above, now draw each new budget constraint she would face if:

i) The price of energy drinks fell to $2, ceteris paribus;

ii) The price of gasoline rose to $4.50 per gallon, ceteris paribus;

d) In each case in part c), how does the trade-off (opportunity cost) of energy drinks in terms of gasoline change.

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Business Economics: Miley cyrus under the conditions of a court order is
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