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Local performers are gradually loosing in the competition

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Serida lives in the North of Sparrowshire. Like all other residents of the country, she consumes barley seeds (B) and grilled grasshoppers (G). Sparrowshire was always proud of being able to maintain the low prices for these two goods: barley seeds cost 1 SSD (Sparrowshire Dollars) per ounce, and the grasshoppers are 2 SSD each. Serida is a well known singer in her part of country and earns 100 SSD per month.

a. Draw Serida’s budget line on a graph. Put barley seeds on the y-axis and grasshoppers on the x-axis. Mark the numerical value of the y-intercept, x-intercept and the slope. What is the equation of this budget line?

b. Serida decides that she wants to have 25 ounces of barley seeds and 40 grasshoppers every month. Is this bundle affordable for her? Does it exhaust her income? What if her choice is 15 ounces of barley seeds and 40 grasshoppers?

c. Local performers are gradually loosing in the competition with recognized international bands, and Serida’s income decreases to $50 while prices are the same as before. What is the equation of this new budget line? How does it compare to the budget line from part (a)?

d. Another world financial crisis reaches Sparrowshire, causing all prices to double from their original levels. What happens to Serida’s budget line (assume her income is 100 SSD as before)? How does it compare to the budget line from parts (a) and (c)?

e. The Duke of Sparrows declares a national campaign promoting the benefits of vegetarian diet. As a result, the price of barley seeds doubles from 1 SSD to 2 SSD per ounce while the price of grasshoppers remains at 2 SSD per grasshopper and Serida’s income remains 100 SSD. Draw the new budget line on your graph. What is the new equation for the budget line? How does it compare to the budget line from part (a)?

f. Serida retires and, trying to avoid unnecessary media attention, becomes very discreet about her income. It is known that the prices of barley seeds and grasshoppers have changed so that now Serida can only consume 60 ounces of barley seeds and 30 grasshoppers with her income. It is known that the price of barley seeds is still 1 SSD, and the price of grasshoppers is 3 SSD. What is Serida’s budget constraint after retirement?

Reference no: EM13298952

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