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Budget constraints and opportunity costs

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Draw two budget constraints and show 2 opportunity costs

Given:
Income = 400/week
Consumer buys widgets (2.50 each) and composite good (costs 1/unit)

1. Sketch budget constraint
2. What is opportunity cost(in widgets) of an additional unit of composite good

Subsequently price of composite good rises to 1.50/unit, widget price stays same
3. Sketch new budget constraint
4. What is new opp cost(in widgets) of an additional unit of the composite good

Need to understand underlying reasoning for shifts in the budget constraint and the opp cost of an additional unit.

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Solution Summary

Budget constraints and opportunity costs are depicted.

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I've attached your graph.

1. The budget constraint is line BC1.
2. The opportunity cost of 1 unit of composite goods is 0.4 widgets (1/2.5).
3. The new budget constraint is line BC2.
4. Now the opportunity cost of 1 unit of composite ...

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