Exercises: The budget constraint

Bruno has $\$120$ to eat during the prepa break. Each torta costs $\$40$ and each soft drink $\$20$.

1. a) If he spends it all on tortas, how many can he buy? And if he spends it all on soft drinks?
2. b) Check whether he can afford these two combinations: 2 tortas and 2 soft drinks; 3 tortas and 1 soft drink.
3. c) Which of the combinations above exactly uses up his budget?

Andrea has $\$200$ and buys only two goods: tacos at $\$25$ and flavored drinks at $\$20$. The graph shows her budget line and two marked combinations:

1. a) Write the equation of Andrea's budget constraint, calling $x$ the tacos and $y$ the drinks.
2. b) Decide whether combinations A and B are affordable with her budget and justify it with calculations.
3. c) What is the opportunity cost of one taco, measured in drinks? Explain how you get it.

A consumer has $\$90$ and chooses between french fries ($\$30$ per order) and soft drinks ($\$15$ each). His marginal utilities are:

Unit	MU fries (utils)	MU soft drink (utils)
1st	60	33
2nd	42	21
3rd	30	15
4th	20	12

1. a) Compute the marginal utility per peso spent, $\frac{MU}{p}$, for each unit of both goods.
2. b) Find the combination that spends the full $\$90$ and maximizes total utility. (Hint: at the optimum, the marginal utility per peso is the same for both goods.)
3. c) Check your answer by computing the total utility of every combination that uses up the budget.