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1)Krystal Mark o bobove on Writing Poems 8 $12 Lungo bonitorohoi bon Writing TV Commercials 2 4.1 58 nad 100 to 2. 11) Refer to Table 2.1. For Krystal, the opportunity cost of writing one TV commercial is A) 1/4 of a poem. C) 4 poems, o obno dobib joyli bomoved blood D) 6 poems. gible brage door to 2921 Answer: C gollobang gilamos dos bolo to B) 2 poems.
2)An Italian restaurant wanted to increase its business, so it offered a promotion where you could buy one pasta dish at full price and get the next three pasta dishes for $ 5 each. The regular (i.e., full) price of the pasta dishes is $ 10. Assume that your income is $ 40 per day and the price of all other goods you could buy with your income is $ 1 each.
A. Draw a budget constraint to represent the situation before the promotion. On the same graph, draw another budget constraint to represent the situation with the promotion. Place pasta on the horizontal axis and all other goods on the vertical axis. Make sure that you draw the graph large enough so that you can clearly see the differences in the budget constraints.
B. How is this promotional offer likely to impact your consumption decisions? Explain.
1)Please rate the answer
Answer C) 4 poems
Opportuniy cost is the value of the benefit sacrificed when an alternative is chosen over the other . In ohter words , is is the value of he next best alternatives . For example in the above question IN order to write Tv commercials Krystal will have to sacrifice writing poems .THe Opportunity cost is calculated as follows :
O.C = Units of the good sacrificed / units of the good gained
O.C. . = Units of writing poem / units of writing commercial
This is because we are writing (gaining ) a Tv commercial and sacrficng poem for that
Opportuniy cost
= 8/2 ( we have to give up 8 poems to write 2 Tv commercials )
= 4 Poems per commercial is the opportunity cost
2)a) When the price of Pasta was $10 and all other goods is $1 with income $40, budget constraint becomes $10P + $1O = $40. The budget line would look like AB in the diagram, where consumer can consume maximum of 4 units of Pasta.
After promotion, when the three pasta after the first unit will be available for $5 and prices of others good as well as income remains the same. The budget constraint is $10P + 1O = $40 from point A to point D, after point D till point C it becomes $5P + $1O = $40 which makes the budget line flatter than the initial budget line.
b) This potential offer would raise the consumption of Pasta as it is available at cheaper prices making consumer richer in terms of real quantity of goods consumer and hence making them better off.
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