Sarah consumes apples and oranges (these are the only fruits she eats). She has decides that her monthly budget for fruit will be $50. Suppose that one apple costs $0.25, while one orange costs $0.50. Let x denote the quantity of apples and y denote the quantity of oranges that Sarah purchases.
a. What is the expression for Sarah's budget constraint?
b. Draw a graph of Sarah's budget line.
c. Show graphically how Sarah's budget line changes if the price of apples increases to $0.50.
d. Show graphically how Sarah's budget line changes if the price of oranges decreases to $0.25.
e. Suppose Sarah decides to cut her monthly budget for fruit in half. Coincidentally, the next time she goes to the grocery store, she learns that oranges and apples are on sale for half price, will remain so for the next month, i.e., the price of apples falls from $0.25 per apple to $0.125 per apple and the price of oranges falls from $0.50 per orange to $0.25 per orange. What happens to the graph of Sarah's budget line?