Question: Chapter 2-Budget Constraint Suppose Fred has $80 to spend. He can spend it on one of two things: apples and bananas. The price of

Chapter 2-Budget Constraint Suppose Fred has $80 to spend. He can spend

Chapter 2-Budget Constraint 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 (x=100, x=150) affordable to Fred? What are the two ways you know?

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