Question

Assume that Diego has S400 per month to divide between playing paintball and playing golf. Assume that playing paintball costs S40 and playing golf costs S20. Suppose Diego plays paintball six times per month and plays golf eight times per month. a. Draw Diego's budget constraint and show that he can afford six games of paintball and eight rounds of golf. b. Assume that Diego has some unexpected expenses one month and can only spend S320 that month. Draw his new budget constraint. c. As a result of the decrease in income, Diego decides to play 11 rounds of golf and two games of paintball. What kind of a good is paintball? What kind of a good is golf? d. Assume Diego has his original S400 per month to spend and the price of paintball is still S40, but the price of golf doubles. Draw his new budget constraint.

Answer 1

Answer:

a) b) and d) attached answer

c) from Diego's point of view: golf is an inferior good while paintball a normal good

Explanation:

The budget constrain is a line of all posible consumption with the given income and cost of goods.

a) attached file

b) The budget constrain will decrease as there is less income available to spend. attached file

c) inferior good demand increase as the income decrease while normal good demand decrease as income decrease.