1. Sam budgets $50 a week for her weekday lunch. She only considers two options: sandwiches (x) which cost $5 and salads (y) which cost $10.
   1. Calculate and illustrate her budget constraint.
   2. Now assume that the price of sandwiches increases to $6.25. Calculate and add this to your illustration.
   3. Sam considers one sandwich and one salad to be perfect substitutes for each other. Calculate the marginal rate of substitution and the slope of the new budget constraint (from b.).
   4. Determine her optimal bundle and add this to your illustration appropriately.

Answer rating: 100% (QA)

Lets start by calculating the budget constraint for Sams lunch options with sandwiches x priced at 5 ... View the full answer