Question

4. Jane has $15 to spend on bread and cheese. The price of a slice of bread is $1, and the price of a slice of cheese is $1. Jane is very particular about her preferences and will only eat whole cheese sandwiches that have exactly 2 slices of bread and 1 slice of cheese. a. Draw and clearly label a graph with bread on the X-axis and cheese on the Y-axis to show this budget constraint and an indifference curve showing her best affordable bundle. b. Now the price of bread rises to $2 per slice. On the same graph, draw the new budget line and the new best affordable bundle. c. How much income would Jane need in order to purchase her original bundle at the new price of bread? Show this hypothetical budget line on the graph. d. Label the total effect, income effect, and substitution effect on the graph.

          4. Jane has $15 to spend on bread and cheese. The price of a slice of bread is $1, and the price of a
slice of cheese is $1. Jane is very particular about her preferences and will only eat whole cheese
sandwiches that have exactly 2 slices of bread and 1 slice of cheese.
a. Draw and clearly label a graph with bread on the X-axis and cheese on the Y-axis to
show this budget constraint and an indifference curve showing her best affordable
bundle.
b. Now the price of bread rises to $2 per slice. On the same graph, draw the new budget
line and the new best affordable bundle.
c. How much income would Jane need in order to purchase her original bundle at the new
price of bread? Show this hypothetical budget line on the graph.
d. Label the total effect, income effect, and substitution effect on the graph.

4. Jane has 15 to spend on bread and cheese. The price of a slice of bread is1, and the price of a
slice of cheese is 1. Jane is very particular about her preferences and will only eat whole cheese
sandwiches that have exactly 2 slices of bread and 1 slice of cheese.
a. Draw and clearly label a graph with bread on the X-axis and cheese on the Y-axis to
show this budget constraint and an indifference curve showing her best affordable
bundle.
b. Now the price of bread rises to2 per slice. On the same graph, draw the new budget
line and the new best affordable bundle.
c. How much income would Jane need in order to purchase her original bundle at the new
price of bread? Show this hypothetical budget line on the graph.
d. Label the total effect, income effect, and substitution effect on the graph.

Added by Jacob M.

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