Draw budget constraint for cooking oil and flour, Financial Accounting

1. You can buy any quantity of cooking oil at $5 per litre and any quantity of flour at $2 per kilo. You have allocated $20 to spend on cooking oil and flour.   

(a) If you choose to buy 2 litres of cooking oil, what is the maximum amount of flour you can buy with your $20 budget?  

(b) If you choose to buy no cooking oil, then how much flour can you afford with your $20 budget?

 (c) Draw your budget constraint for cooking oil and flour.  

(d) If you get hungry on the way to the shop and spend $5 of your $20 budget on a snack, then how does this affect your budget constraint for flour and oil? Show how the constraint changes in the diagram.  

(e) This part is a bit more demanding, but you may find it fun. If you did not spend the $5 on a snack, so you have still $20 in your budget, then are there any prices for cooking oil and flour that would leave you with the same budget constraint as in part (d)? If you think the answer is no, you haven't thought enough.

Hint: Both of the budget constraints are straight lines. Think about what must be true about the prices

for a straight line with a $20 budget to be the same as the straight line in (d)? 

 

Posted Date: 4/1/2013 3:16:59 AM | Location : United States







Related Discussions:- Draw budget constraint for cooking oil and flour, Assignment Help, Ask Question on Draw budget constraint for cooking oil and flour, Get Answer, Expert's Help, Draw budget constraint for cooking oil and flour Discussions

Write discussion on Draw budget constraint for cooking oil and flour
Your posts are moderated
Related Questions
Q. What is Auditors report explain? Special Report - Special report is a term used for Auditors' reports issued in connection with various types of financial presentations, inc

Research and Development (R&D) - Research is a planned activity aimed at discovery of new knowledge with hope of developing new or improved services andproducts. Development is the

IFRS guidelines IFRSs Gives the guideline on the content and the accounting statements of certain events and transactions in the financial statements. The following IFRSs are r

Suppose the interest rate for a one-period bond is 4%. (a) What is the price of an asset paying (1,1,1) which means 1 after 1 period, 1 after 2 periods, and 1 after 3 periods.

La Favorite Pastry Shop has been in business since 1985 and started with a large commercial oven that was built in 1955. Max, the owner is debating whether or not to purchase a new

Investors need a 15% rate of return on Brooks Sisters' stock (rs = 15%). a.  What would the value of Brooks's stock be if the last dividend was D0 = $1.5 and if investors expect

Mr. Wong currently running a small manufacturing business.  The Trial Balance of the business at 31 March 2011 is as follows:

The cash flow as well as other benefits of factoring was discussed earlier. Invoice discounting as well offers cash flow advantages. Here selected invoices of superior quality are

Q. Ownership and Control related issue of debt? Issuing equity is able to have ownership implications for a company particularly if the finance is raised by a placing or offer

VESTING OF PROPERTY IN TRUSTEES The settlor must transfer the property to the original trustees in the proper legal manner. Similar transfers must be made on a change of truste