A. Suppose one bottle of sparkling water is $1, and also one bottle of soda is...

 

Transcribed Image Text:

A. Suppose one bottle of sparkling water is $1, and also one bottle of soda is $1. Christy spends $110 on the consumption of soda and sparkling water in a month. Draw Christy's budget constraint and indifference curves assuming she drinks 60 soda and 50 sparkling waters BEFORE soda tax is introduced. B. Now, 10% soda tax is introduced (i.e. $1 soda is now $1.10). Draw Christy's new budget constraint and indifference curves. A. Suppose one bottle of sparkling water is $1, and also one bottle of soda is $1. Christy spends $110 on the consumption of soda and sparkling water in a month. Draw Christy's budget constraint and indifference curves assuming she drinks 60 soda and 50 sparkling waters BEFORE soda tax is introduced. B. Now, 10% soda tax is introduced (i.e. $1 soda is now $1.10). Draw Christy's new budget constraint and indifference curves.