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Begonia Begonia
wrote...
Posts: 464
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5 years ago
Grant has $200 to spend each month on restaurant meals and jazz performances at his
neighborhood jazz club. The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10. Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances. Suppose Grant still has $200 to spend, but the price of restaurant meal rises to $25, while the price of jazz performance ticket drops to $8. Can it be determined if Grant is better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.
Textbook 
Microeconomics

Microeconomics


Edition: 7th
Authors:
Read 33 times
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Replies
wrote...
5 years ago
Initially, when the price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10, Grant consumes the bundle "A" on BC1. Following the price changes, Grant's new budget line is BC2. He is no longer able to afford this same bundle "A" as shown in the figure below, but without having information to plot his new indifference curve, it is uncertain whether he is better off or worse off than he was before the price change.

Begonia Author
wrote...
5 years ago
Helps a lot... Now I'm ready for my quiz
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