Every year, Antoni hosts a holiday party for his friends. His party budget is $200. Antoni spends

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Every year, Antoni hosts a holiday party for his friends. His party budget is $200. Antoni spends his budget on food platters that cost $25 each and on entertainment, which costs $50 per hour.

a. Graph Antoni’s budget constraint for food and entertainment.
b. To reward his loyal business, the entertainment company Antoni hires has offered him a 50 percent discount on entertainment purchases for this year’s party. On your graph, illustrate Antoni’s new budget constraint for food and entertainment.
c. Assuming that food platters and entertainment are normal goods, what can you say about the quantity of each good that Antoni will purchase after the discount? Will the quantity of entertainment increase or decrease, or is the change uncertain? Will the quantity of food increase or decrease, or is the change uncertain?

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Microeconomics

ISBN: 9781260521078

3rd Edition

Authors: Dean S. Karlan, Jonathan J. Morduch

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