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You have $20 to spend on high quality pens and low quality pens. High quality pens cost $5 each and low quality pens cost $2 each.
(a) Suppose that you will spend your entire $20. Write down your budget constraint. You may simply write out the equation or draw the budget line. You don't need to do both.
(b) If you buy 5 low quality pens, how many high quality pens can you afford?
(c) If you are given 25% increase in your budget, write down your budget constraint. You may simply write out the equation or draw the budget line. You don't need to do both.
(d) If you were not given a 25% increase in your budget, are there any prices for high quality pens and low quality pens that would leave you with the same budget constraint as part (c)? If yes, what are they?
1. Find out the present value of Rs. 10,000 to be required after 4 years if the interest rate is 6%. 2. A Firm can invest Rs. 10,000 in a project with a life of three years.
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