Question

Debra usually buys a soft drink when she goes to a movie theater, where she has a choice of three sizes: the 8 -ounce drink costs $\$ 1.50$, the 12 -ounce drink $\$ 2.00$ and the 16 -ounce drink $\$ 2.25 .$ Describe the budget constraint that Debra faces when deciding how many ounces of the drink to purchase. (Assume that Debra can costlessly dispose of any of the soft drink that she does not want.

Name: Problem 9, Chapter 3: Microeconomics
Uploaded: 2021-02-25T07:01:44-08:00
Duration: 3 min 53 s
Channel: Oluwadamilola Ameobi
Description: Debra usually buys a soft drink when she goes to a movie theater, where she has a choice of three sizes: the 8 -ounce drink costs 1.50, the 12 -ounce drink 2.00 and the 16 -ounce drink 2.25 . Describe the budget constraint that Debra faces when deciding how many ounces of the drink to purchase. (Assume that Debra can costlessly dispose of any of the soft drink that she does not want.

   Debra usually buys a soft drink when she goes to a movie theater, where she has a choice of three sizes: the 8 -ounce drink costs $\$ 1.50$, the 12 -ounce drink $\$ 2.00$ and the 16 -ounce drink $\$ 2.25 .$ Describe the budget constraint that Debra faces when deciding how many ounces of the drink to purchase. (Assume that Debra can costlessly dispose of any of the soft drink that she does not want.

Microeconomics

Robert S. Pindyck,… 8th Edition

Chapter 3, Problem 9

Instant Answer

Solved by Expert Oluwadamilola Ameobi

02/25/2021

Step 1

The 8-ounce drink costs $\$1.50$, which is $\frac{\$1.50}{8} = \$0.1875$ per ounce. The 12-ounce drink costs $\$2.00$, which is $\frac{\$2.00}{12} = \$0.1667$ per ounce. The 16-ounce drink costs $\$2.25$, which is $\frac{\$2.25}{16} = \$0.1406$ per ounce. Show more…

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Debra usually buys a soft drink when she goes to a movie theater, where she has a choice of three sizes: the 8 -ounce drink costs $\$ 1.50$, the 12 -ounce drink $\$ 2.00$ and the 16 -ounce drink $\$ 2.25 .$ Describe the budget constraint that Debra faces when deciding how many ounces of the drink to purchase. (Assume that Debra can costlessly dispose of any of the soft drink that she does not want.

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Key Concepts

Budget Constraint

A budget constraint represents the set of all consumption bundles a consumer can afford given their income and the prices of goods. It illustrates the trade-off between different quantities of goods that can be purchased, showing the limitations imposed by the consumer’s financial resources.

Nonlinear Pricing and Piecewise Budget Constraints

When goods are sold in discrete quantities or packages rather than continuously, the cost per unit may not be constant. This results in a budget constraint that is piecewise linear, with different segments having different slopes corresponding to the effective per-unit price in each range. Such pricing structures lead to nonlinearity in the budget set, affecting consumer choices when optimizing consumption.

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