Answer Happy

Problem 5: Changes in the Budget Constraint (4 points) Silvic's friend Paulle also enjoys consuming hamburgers and fries, and has a similarly hearty appetite. On the grach below. BC1 represents Paulie's initial budget constraint, and BC2 represents his subsequent budget constraint. Suppose that Paulie's weekly fast food budget starts at $240, 140 120 100 60 20 60 a. Based on the information that we have, the price of fries must be and the price of hamburgers must be

b. Briefly describe what must have happened in order for Paulie to move from BC1 to BC2. Be specific about what changed and by how much. How do you know? From BC1 to BC2 we know one thing has changed either the price of hamburgers, the price of fries, or Paulle's income. First, determine which of those three must have changed, then determine the new value of either the price or income c. After the move from BC1 to BC2, what has happened to Paulle's utility? How do you know? Eat View In For To 12 PBI WA BE A 6² B