Jim buys only milk and cookies.a.In year 1, Jim earns
Chapter , Problem 5(choose chapter or problem)
Jim buys only milk and cookies.a.In year 1, Jim earns $100, milk costs $2 per quart, and cookies cost $4 per dozen. Draw Jims budget constraint.b.Now suppose that all prices increase by 10 percent in year 2 and that Jims salary increases by 10 percent as well. Draw Jims new budget constraint. How would Jims optimal combination of milk and cookies in year 2 compare to his optimal combination in year 1?
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