Question

Brenda likes Coca-Cola and Hot dogs. Coca-Cola cost $4 per bottle and Hot dogs cost $2 each. There is a special promotion for Coke that will last for one month. If Brenda sends in the bottle tops from the Cokes she drinks during the next month, she will get a refund of $2 for every bottlecap beyond the first 40 that she returns. For example, if she returns 45 bottle caps she will get back $10 = $2(45 − 40). Brenda has $200 to spend on Coke and Hot dogs during the next month. Draw her budget line with Coke on the horizontal axis and hot dogs on the vertical axis. Find the points where the budget line hits the axes and the point where it has a kink. At each of these three points write down the quantities of each good consumed.

Answer 1

First 40 cokes will cost 4*40=160.
money left=200-160=40.She can buy 40/2=20 more cokes.

Total number of cokes she can buy if she spends all her money on coke=60. This is our horizontal intercept.

If she spends al her money on hotdogs, she can buy 200/2=100 hotdogs. This is our vertical intercept.

Till 40 cokes, the slope of the line would be 4.2=2. Post that, the slope will become 2/2=1. 40 cokes is the point where the kink occurs.