1. Zenna buys only apples and bananas. The price of apples is $2 a pound and the
ID: 1173719 • Letter: 1
Question
1. Zenna buys only apples and bananas. The price of apples is $2 a pound and the price of bananas is $1 a bunch. She has $20 to spend on apples and bananas. a) Write the equation of her budget line or budget constraint.
b) If she spends all of her money on apple show many pounds of apples could she buy?
c) If she spends all of her money on bananas how many bunches of bananas could she buy?
d) If apples are on the horizontal axis what is the slope of her budget constraint?
e) If she buys 6 pounds of apples and she spends all of her income of $20 on either apples or bananas how many bunches of bananas does she buy?
Explanation / Answer
Answer : 1) a) Let quantity of apple = A; and quantity of banana = B.
Given,
Price of banana (Pb) = $1 per bunch
Price of apple (Pa) = $2 per pound.
Total spending amount is $20.
Now the budget constraint become as following :
(Pa×A) + (Pb×B) = Spending Amount
=> (2×A) + (1×B) = 20
=> 2A + B = 20.
Therefore, the budget constraint of Zenna is :
2A + B = 20.
b) According to the question, Zenna spends her total spending amount $20 on apple only. This means that the spent on banana is zero (0). Now from Zenna's budget constraint we get,
2A + 0 = 20
=> A = 20/2 = 10
Therefore, Zenna buys 10 pounds of apple by spending $20.
c) According to the question, Zenna spends her total spending amount $20 on bananas only.This means that the spent on apples is zero (0). Now from Zenna's budget constraint we get,
(2×0) + B = 20
=> B = 20.
Therefore, Zenna buys 20 bunches of banana by spending $20.
d) According to the question, apple is measured on horizontal axis. This means that the vertical axis measures the quantities of bananas.
The slope of budget constraint = - (Price of good which is measured on horizontal axis / Price of good which is measured on vertical axis)
Therefore,
Zenna's budget constraint slope = - Pa/Pb = - 2/1 = -2 .
e) Here Zenna buys 6 pounds of apples and spends $20 on apples and bananas only. This means that here A = 6 pounds. Putting the value of A in Zenna's budget constraint we get,
(2×6) + B = 20
=> 12 + B = 20
=> B = 20 - 12
=> B = 8
Therefore, here Zenna buys 8 bunches of bananas.
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