Question

# You have an income of \$80 to spend on movie tickets and the composite good (all...

1. You have an income of \$80 to spend on movie tickets and the composite good (all other goods), Y. Movie tickets cost \$8 per ticket and Y costs \$16 per unit.
1. Write an equation for your budget constraint.
2. If you spent all your income on movie tickets, how much could you buy?
3. What is the opportunity cost of movie tickets in terms of Good Y?
4. If you spent all your income on Good Y, how much could you buy?
5. Graph your initial budget constraint and label it BC0.
6. Suppose the price of movie tickets increases to \$10 while everything else stays the same. Write down your new budget equation and graph the new budget constraint; label it BC1.
7. Suppose your income increases to \$96 while the prices of both commodities remain at \$8 for movie tickets and \$16 for Y. Write down your new budget constraint and graph the new budget constraint and label it BC2.

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