ECON 200 Study Guide - Midterm Guide: Budget Constraint, Fixed Cost, Nash Equilibrium

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Problem a. maya earns dollars a month and spends her income on clothing and books. The price of books is and the price of clothing is : show maya"s budget constraint in a diagram. Identify the slope and intercepts of this budget constraint. See lines and text in maroon color below. nd exam answers to: suppose the price of books falls to , maya"s income remains , and the price of clothing remains . Add a line to your first diagram that shows maya"s new budget constraint. Identify the slope and intercepts of this new budget constraint. The decrease in the price of books makes it possible for. Maya to buy more books and more clothes, if she wants. She is likely to buy more books; we can"t be sure whether she will buy more or less or the same number of clothes: now suppose maya"s income increases to and prices remain as in part (b).

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