Suppose Fred has $80 to spend. He can spend it on one of two things: apples...

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Suppose Fred has $80 to spend. He can spend it on one of two things: apples and bananas. The price of one apple is $0.50. The price of one banana is $0.20. Let apples be "good 1" and bananas be "good 2". 1) Draw Fred's budget line. Make sure you label all axes and intercepts. 2) What is the slope of Fred's budget line? State your answer in terms of a specific number. 3) Write the equation that corresponds to Fred's budget constraint. 4) Re-arrange the equation that corresponds to Fred's budget constraint so that it is in slope-intercept form. Make sure that your "slope" is consistent with your answer to question 2. 5) Is the bundle (x₁=100, x2=150) affordable to Fred? What are the two ways you know? Suppose Gus has $40 to spend. He can spend it on one of two things: pencils and notebooks. The price of one pencil is $1. The price of one notebook is $4. Let pencils be "good 1" and notebooks be "good 2". 6) Draw Gus' budget line in black. Then, in red, draw what Gus' budget line would look like if someone gave him $10 AND the price of notebooks fell to $2 apiece. Make sure you label all axes and intercepts. 7) What are the slopes of the black and red budget lines in question 6? State your answer in terms of a specific number. 8) Draw Gus' original budget line in black. Assume as before that the price of one pencil is $1, the price of one notebook is $4, and Gus has $40 to spend. Now, in blue, draw what Gus' budget line would look like if the government levied a 25% sales tax on just pencils. Make sure you label all axes and intercepts. 9) Draw Gus' original budget in in black. Assume as before that the price of one pencil is $1 (there is no tax), the price of one notebook is $4, and Gus has $40 to spend. Now, in green, draw what Gus' budget line would look like if the government gave Gus a subsidy of $2 for each notebook he purchased. 10) Under the notebook subsidy described in question 9, would the bundle (x₁=15, x2=10) be affordable to Gus? Provide justification for your answer using an equation. Suppose Fred has $80 to spend. He can spend it on one of two things: apples and bananas. The price of one apple is $0.50. The price of one banana is $0.20. Let apples be "good 1" and bananas be "good 2". 1) Draw Fred's budget line. Make sure you label all axes and intercepts. 2) What is the slope of Fred's budget line? State your answer in terms of a specific number. 3) Write the equation that corresponds to Fred's budget constraint. 4) Re-arrange the equation that corresponds to Fred's budget constraint so that it is in slope-intercept form. Make sure that your "slope" is consistent with your answer to question 2. 5) Is the bundle (x₁=100, x2=150) affordable to Fred? What are the two ways you know? Suppose Gus has $40 to spend. He can spend it on one of two things: pencils and notebooks. The price of one pencil is $1. The price of one notebook is $4. Let pencils be "good 1" and notebooks be "good 2". 6) Draw Gus' budget line in black. Then, in red, draw what Gus' budget line would look like if someone gave him $10 AND the price of notebooks fell to $2 apiece. Make sure you label all axes and intercepts. 7) What are the slopes of the black and red budget lines in question 6? State your answer in terms of a specific number. 8) Draw Gus' original budget line in black. Assume as before that the price of one pencil is $1, the price of one notebook is $4, and Gus has $40 to spend. Now, in blue, draw what Gus' budget line would look like if the government levied a 25% sales tax on just pencils. Make sure you label all axes and intercepts. 9) Draw Gus' original budget in in black. Assume as before that the price of one pencil is $1 (there is no tax), the price of one notebook is $4, and Gus has $40 to spend. Now, in green, draw what Gus' budget line would look like if the government gave Gus a subsidy of $2 for each notebook he purchased. 10) Under the notebook subsidy described in question 9, would the bundle (x₁=15, x2=10) be affordable to Gus? Provide justification for your answer using an equation.

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1 Freds budget line is shown below The xaxis represents the quantity of apples and the yaxis represe... View the full answer