Suppose that bread and housing must be paid for in three ways: money, ration coupons, and time spent waiting. To get, for example, a loaf of bread one must pay $10, hand over 3 ration coupons, and stand in line for 2 hours. To buy a house, likewise, one must spend a specified amount of money, hand over ration coupons, and spend time looking for a house. (McC Problem 1.1.1) 

(a) Draw the three budget lines for bread and housing facing Steve Jones in such a way that each line intersects the other two lines. What is the relevant budget constraint along which he can operate? (Hint: Steve Jones is constrained by the fixed amount of time, income, and ration coupons he has to spend. Can he use up more money than he has? Coupons? Time? What portion of the three lines represents this fact?) 

(b) True or false: As more bread and less housing are bought, the price of bread relative to housing that Steve faces rises? (Hint: What is the shape of the attainable area? What happens to its slope?)

Answer rating: 100% (QA)

a see the image below No he cant spend more as it is the unattainable ar... View the full answer