This problem continues with the adventures of Mr. Consumer from the previous problem.
(a) In April, cigarette prices rose to $2 per pack and ice cream was still on sale for $1 per pint. Mr. Consumer bought 34 packs of cigarettes and 32 pints of ice cream. Draw his April budget line with pencil and label his April bundle with the letter A. Was he better off or worse off than in January? Was he better off or worse off than in
February, or can’t one tell?
(b) In May, cigarettes stayed at $2 per pack and as the sale on ice cream ended, the price returned to $2 per pint. On the way to the store, however, Mr. C found $30 lying in the street. He then had $130 to spend on cigarettes and ice cream. Draw his May budget with a dashed line. Without knowing what he purchased, one can determine whether he is better off than he was in at least one previous month. Which month or months?
(c) In fact, Mr. C buys 40 packs of cigarettes and 25 pints of ice cream in May. Does he satisfy WARP?