You have been given the assignment to read Beer School: Bottling Success at The Brooklyn Brewery. Upon completion of reading this informative book dealing with this real life rags to riches entrepreneurial….
What are the two assumptions economists make about consumer preferences?
What are the two assumptions economists make about consumer preferences? What is an indifference curve? What is a budget constraint? How do consumers choose the optimal consumption bundle? Jacob receives an allowance of $5 per week. He spends all his allowance on ice cream cones and cans of Lemon Fizz soda. a. If the price of ice cream cones is $0.50 per cone and the price of cans of Lemon Fizz is $1 per can, draw a graph showing Jacob’s budget constraint. Be sure to indicate on the graph the maximum number of ice cream cones and the maximum number of cans of Lemon Fizz that Jacob can buy. b. Jacob buys 8 ice cream cones and 1 can of Lemon Fizz. Draw an indifference curve representing Jacob’s choice, assuming that he has chosen the optimal combination. c. Suppose that the price of ice cream cones rises to $1 per cone. Draw Jacob’s new budget constraint and his new optimal consumption of ice cream cones and cans of Lemon Fizz.