Question

Suppose Alphonso’s 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’s new budget constraint. What happens to the opportunity cost of bus tickets?

Name: Problem 1, Chapter 2: Principles of Microeconomics for AP® Courses
Uploaded: 2021-01-04T14:26:22-08:00
Duration: 2 min 4 s
Channel: Natalie Britton
Description: Suppose Alphonso’s 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’s new budget constraint. What happens to the opportunity cost of bus tickets?

   Suppose Alphonso’s 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’s new budget constraint. What happens to the opportunity cost of bus tickets?

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw,… 2nd Edition

Chapter 2, Problem 1

Instant Answer

Solved by Expert Natalie Britton

01/04/2021

Step 1

The price of a bus ticket is now $1, so he can buy a maximum of $10/$1 = 10 bus tickets. The price of a burger is $2, so he can buy a maximum of $10/$2 = 5 burgers. Show more…

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Suppose Alphonso’s 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’s new budget constraint. What happens to the opportunity cost of bus tickets?

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Key Concepts

Budget Constraint

A budget constraint represents all the combinations of goods a consumer can purchase given their income and the prices of those goods. It illustrates the trade-offs a consumer faces and provides a graphical way to understand the limitations imposed by a fixed budget, showing how spending more on one good reduces the amount that can be spent on another.

Opportunity Cost

Opportunity cost is the value of the next best alternative forgone when a choice is made. In the context of a budget constraint, it relates to how much of one good must be given up to purchase an additional unit of another. When the price of a good increases, the opportunity cost of that good, in terms of the other good forfeited, also increases, reflecting a steeper trade-off on the budget line.

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