Samantha takes her kids to a carnival with $50 and is intending to spend the money...

 

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Samantha takes her kids to a carnival with $50 and is intending to spend the money purchasing tickets for rides and for food. She gets to the carnival and sees the price of a ride is $5 and the price of all food items are $10.00. Then she sees that she can get the first two rides for free. The carnival owner does not know Samantha's preferences for rides and obviously hopes that the free ride offer ends up with Samantha paying for more rides than she would pay for if she was not offered the free rides (there are no additional costs to the owner from having more riders so they just gain from having more paid rides). 7a) (10 points) Graph Samantha's indifference curves and budget line in a way that demonstrates that the free rides was a bad idea for the company. Put food on the vertical axis and number of rides on the horizontal axis. (Hint: graph Samantha's budget set with and without the free rides and show optimal choices) 7b) (10 points) Show Samantha's indifference curves and budget line in a way that would make the free rides a good idea for the company Samantha takes her kids to a carnival with $50 and is intending to spend the money purchasing tickets for rides and for food. She gets to the carnival and sees the price of a ride is $5 and the price of all food items are $10.00. Then she sees that she can get the first two rides for free. The carnival owner does not know Samantha's preferences for rides and obviously hopes that the free ride offer ends up with Samantha paying for more rides than she would pay for if she was not offered the free rides (there are no additional costs to the owner from having more riders so they just gain from having more paid rides). 7a) (10 points) Graph Samantha's indifference curves and budget line in a way that demonstrates that the free rides was a bad idea for the company. Put food on the vertical axis and number of rides on the horizontal axis. (Hint: graph Samantha's budget set with and without the free rides and show optimal choices) 7b) (10 points) Show Samantha's indifference curves and budget line in a way that would make the free rides a good idea for the company

Answer rating: 100% (QA)

Here are graphs for questions 7a and 7b 7a Bad idea for company Goods Space Food is on the ya... View the full answer