Question

Suppose Scott has a budget of $56 that he spends on movies (Q1) and roller skating (Q2). The price of movie tickets recently increased from $5 per person to $8 per person, and the price of roller skating decreased from $8 to $7 per person. What is Scott's new budget constraint?

Answer 1

Answer:

1.6 Q1 + 0.875 Q2 = $56

Explanation:

Budget constraint equation represents the total budget allocation to different activities under consideration.

old Budget Constraint

Q1 + Q2 = $56

New Budget Constraint

(Q1)*8/5 + (Q2)*7/8 = $56

(Q1)*1.6 + (Q2)*7/8 = $56

(Q1)*1.6 + (Q2)*0.875 = $56

1.6 Q1 + 0.875 Q2 = $56

So best answer made based on data available.