Purchase Solution

# Budget Constraint - Indifference Curve of Imperfect Substitutes

Not what you're looking for?

Josh has \$100 available for school supplies, S, and food, F, from Meijer (Local general merchandise store). The price of each unit of school supplies is \$1 and each unit of food is \$1. Josh spends \$10 on 10 units of school supplies and \$90 on 90 units of food.

a) Draw the budget constraint. (Put School supplies, S, on the X axis and Food, F, on the Y axis). Draw the indifference curve that includes (S = 10, F = 90). S and F are imperfect substitutes.

b) Meijer sends you a coupon for \$20 which can be used only for school supplies. Draw the new budget constraint. Is Josh better off? Would he prefer a general \$20 coupon (can be used for school supplies or food) to the school supply coupon? Show this on your graph. (Be sure that your graph is consistent with your answer.)

##### Solution Summary

The following problem helps with problems involving budget constraints. Step by step calculations are provided for each.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.