Suppose Alphonso’s town raises the price of bus tickets from $0.50 to $1 and the price of burgers rises from $2 to $4. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from $10 to $20. How is his budget constraint affected from all three changes? Explain.
Added by Bruce S.
Step 1
Initially, the price of a bus ticket is $0.50 and the price of a burger is $2. The opportunity cost of a bus ticket in terms of burgers is the number of burgers Alphonso has to give up to buy one bus ticket. In this case, the opportunity cost is $\frac{0.50}{2} = Show more…
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Suppose Alphonso's town raises the price of bus tickets from $\$ 0.50$ to $\$ 1$ and the price of burgers rises from $\$ 2$ to $\$ 4 .$ Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso's weekly spending money increases from $\$ 10$ to $\$ 20 .$ How is his budget constraint affected from all three changes? Explain.
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