Microeconomics · free preview
Optimization, Choosing the Best Affordable Option
Optimization as the three-part recipe of preferences, feasible set and choice, the budget line as the boundary of what is affordable, and its slope as a price of one good in the other.
1. Optimization has three parts
Optimization has three parts
2. The budget line
The budget line
3. The slope is a price
The slope is a price
4. Choosing from a menu when money is not the constraint
Choosing from a menu when money is not the constraint
5. Which bundles are affordable
A student has 120 dollars for treats. Restaurant meals cost 12 dollars each and paperback novels cost 8 dollars each, so affordability is 12m + 8n at most 120. Which of these bundles is NOT affordable?
6. Reading the slope
Meals cost 12 dollars and novels cost 8 dollars, and a student spends a 120 dollar treat budget on only these two goods. What does the slope of the budget line, expressed in novels per meal, represent?
7. Books left after the downloads
A reader has 90 dollars to spend this month. Online downloads cost 9 dollars each and paperbacks cost 6 dollars each. If the reader buys 4 downloads, the rest of the budget goes to paperbacks. How many paperbacks can be bought? Write the number.
8. Testing affordability
A gamer has 60 dollars, video games cost 15 dollars and streaming subscriptions cost 6 dollars. Which bundle is exactly on the budget line?
9. Reading the slope
With games at 15 dollars and streaming subscriptions at 6 dollars, what does the budget line's slope of 2.5 subscriptions per game mean?
10. Comics within the budget
You have 96 dollars, comics cost 8 dollars each and albums cost 12 dollars each. You buy exactly 2 albums. Compute the maximum number of comics you can still afford, and write the number.
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