Zach Has $100 to Spend on Meals at Restaurants and Movie

question 12

Essay

Zach has $100 to spend on meals at restaurants and movie theatre tickets. The price of a meal is $10 and the price of a movie ticket is $5. At equilibrium, Zach goes to the movies 10 times and eats in the restaurant 5 times a month. (Appendix)
(a) Draw Zach's budget constraint and an indifference curve showing his equilibrium.
(b) What is the relationship between the marginal utility of a meal in a restaurant and the marginal utility of a movie at the current equilibrium condition?
(c) If the price of a meal drops to $5 a meal, show graphically how equilibrium changes.
(d) If Zach's budget increases to $200 and prices remain constant ($5 a movie and $10 a meal), show graphically how equilibrium changes.

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