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Chapter 2: Q.1 (page 43)

Suppose Alphonso鈥檚 town raised the price of bus tickets to \(1 per trip (while the price of burgers stayed at \)2 and

his budget remained $10 per week.) Draw Alphonso鈥檚 new budget constraint. What happens to the opportunity cost

of bus tickets?

Short Answer

Expert verified

The opportunity cost for a burger is four tickets on a bus, the opportunity cost of bus tickets is the inverse of the opportunity cost of a burger.

Step by step solution

01

Step 1. Given Information

The price of a bus trip is $1.

The price of burgers is $2.

The weekly budget is $10.

02

Step 2. Alphonso's budget

For new higher price -

Opportunity Cost=PriceofbustripPriceofburgers=$1$2=0.5

slope of the new budget constraint is flatter than original one.

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