Question

Grandma lives in the forest and relies on her favorite niece, Red, to do her weekly grocery shopping. Grandma consumes only two goods, bread and wine, and each week she spends $120 on them. In week 1, price of bread is $2 per loaf and price of wine is $4 per bottle. Knowing perfectly well Grandma's preferences, and willing to make her grandma as well off as possible, Red buys 10 bottles of wine.

11. Draw Grandma's budget line. Make sure that in your diagram the quantity of bread is measured on the horizontal axis.

Answer 1