1.5 Katarina and Ivanna are sisters and plant lovers and have saved a total of $

Question

1.5 Katarina and Ivanna are sisters and plant lovers and have saved a total of $640 to spend on plants for their new apartment in Miami. They have decided to use thi s money on orchids and ferns. Their original budget constraint is shown in the graph below. Let X represent orchids and Y represent ferns. a. What is the equation of the original budget constraint? b. What is the price of an orchid? a ferni c. Assume a price change occurs and Katarina and Ivanna now face the new budget constraint. What is the equation of the new budget constraint? d. With the new budget constraint, what is the price of an orchid? a fern? Ferns 32 24 New Orchids (X) 16 24 32 40

Explanation / Answer

Ans: a )

Price of X ( Orchids ) = $640 / 40 units = $16

Price of Y ( Ferns ) = $640 / 32 units = $20

Budget constraint is

Px * X + Py * Y = I ( Where I = income )

16X + 20Y = 640

Ans:b )

Price of X ( Orchids ) = $640 / 40 units = $16

Price of Y ( Ferns ) = $640 / 32 units = $20

Ans: c )

New price of X = $640 / 16 units = $40

No change in price of Y , Which is $20

New Budget constraint is

Px * X + Py * Y = I ( Where I = income )

40X + 20Y = 640

Ans: d )

New price of X ( Orchids ) = $640 / 16 units = $40

No change in price of Y ( Ferns ), Which is $20

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.