Question

Dilbert spends his entire income of $50 a month on hours of internet access (H) and...

Dilbert spends his entire income of $50 a month on hours of internet access (H) and slices of pizza (P). Draw his monthly budget constraint for each of the follow- ing situations. Please use a separate graph for each part and label all axes and intercepts.

(a) The price of pizza is $1/slice. The internet service provider charges a fixed monthly fee of $20 for service to begin and then $2/hour of service.
(b) The price of pizza is $2/slice. Dilbert subscribes to an internet provider that offers unlimited internet access for a flat fee of $25 per month.
(c) The price of internet access is $1/hour. The price of pizza is buy 2 slices at a price of $5/slice and get one free. (That is, for every 2 slices Dilbert buys, he gets one more for free.)

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Answer #1

Budget line shows various combination of two goods that a person could afford with certain income level.

Following pictures provides budget constraint for the three cases.

All the best :)

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