Question: Imagine that for the past two years, youve consumed only two goods: lattes and scones. As youre probably aware, prices tend to go up over

Imagine that for the past two years, you’ve consumed only two goods: lattes and scones. As you’re probably aware, prices tend to go up over time. If the price of your latte increased from $2 to $3 over the last two years, and the price of scones increased from $1.50 to $2.25, what impact would this have on your budget constraint if your $240 weekly take-home pay didn’t change at all over the same two-year period? Draw both budget constraints on the same set of axes. What if you were able to negotiate a raise to $360 per week? Draw this final budget constraint on the same set of axes as the first two. How does your final budget constraint compare to your original budget constraint from two years ago?

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