Write out the equation or draw the budget line, Financial Management

Assignment Help:

You have $21 to spend on prawns and potatoes. Prawns cost $20 per kilo and potatoes cost $2 per kilo.  

(a) Supposing you can buy as much or as little as you want of prawns and potatoes and you will spend the entire $21, then 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 2.5 kilos of potatoes, how many kilos of prawns can you afford?  

(c) If your wants are to have twice as many (kilos) of prawns as (kilos) of potatoes, show that you would buy 0.5 kilo of potatoes and exactly 1 kilo of prawn.  How much money will you spend on each? Remember you must spend exactly $21.  

(d)  If the price of potatoes rises to $3 per kilo and the price of prawns falls to $18 per kilo, then can you still purchase the quantity of prawns and potatoes you chose in (c)?

Based on your answer, argue that your welfare is likely to be greater in this new situation where the price of potatoes is higher, but the price of prawns is lower.


Related Discussions:- Write out the equation or draw the budget line

Contemporary issues, What are the social and contemporary issues in financi...

What are the social and contemporary issues in financial management?

How to calculate the net income of a year, Is the net income of a year the ...

Is the net income of a year the money the company made that particular year or is it a number whose significance is quite doubtful? The net income of a year is not money that a

Indexed bonds, In indexed bonds, the principal and coupon payme...

In indexed bonds, the principal and coupon payments are linked to the market index like inflation and price index. Index bonds are attractive to investors

Show regression analysis to estimate the default probability, 1. The standa...

1. The standard approach here is to calculate some conventional ratios. These ratios can afterwards be used along with regression analysis to estimate the default probability.

What are sources of finance, Q. What are Sources of Finance? No details...

Q. What are Sources of Finance? No details are specified concerning the nature of a business to comment on and hence only general recommendations can be made. Given that fixed

Evaluate income statement and balance statement, This task must be complete...

This task must be completed in order from 1 to 11 as identified in both the Income Statement and the Balance Sheet. In addition, all answers must cite relevant supporting formulas

Compare potential liability of owners of proprietorships, Compare and contr...

Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations. The sole proprietor has infinite liability for mat

Financial statement, A company commissioned a valuation of its land and bui...

A company commissioned a valuation of its land and buildings for inclusion in its financial statements. The valuation document contained the following details:

Obtain the break even rate, Question 1 (a) These are merely the diffe...

Question 1 (a) These are merely the differences of the two prices. Consequently the mark to market losses are given by { Q 1 - Q 0 ,Q 2 - Q 0 ,Q 3 - Q 0

Advantages and disadvantages of aggressive working capital, What are the ad...

What are the advantages and disadvantages of the aggressive working capital financing approach? An belligerent working capital financing approach typically results in a lower c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd