(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
This problem is going to ask you to use the concepts on budget constraints and maximizing utility.
(Description)
The following text is briefly written:
Tyrone is a utility maximizer. His income is 100 dollars, which he can spend on cafeteria meals and on notepads. Each meal costs 5 dollars, and each notepad costs 2 dollars. At these prices Tyrone chooses to buy 16 cafeteria meals and 10 notepads.
a. Placing notepads on the vertical axis and cafeteria meals on the horizontal axis calculate the vertical and horizontal intercepts and slope of the budget constraint?
(Speaker)
For this particular problem, we're going to analyze Tyrone's decision to purchase cafeteria meals and notepads.
Placing notepads on the vertical axis and cafeteria meals on the horizontal axis, calculate the vertical and horizontal intercepts and slope of the budget constraint.
(Description)
The coordinate plane with Quantity of notepads as a dependent variable on the y-axis and Quantity of cafeteria as an independent variable on the x-axis is drawn.
A straight line passing through a point with coordinates, 0 and 50, and a point with coordinates, 20 and 0, is drawn.
The following text is written to the left of the graph:
Income equals 100 dollars.
Price of cafeteria meals equals 5 dollars.
Price of notepads equals 2 dollars.
(Speaker)
We are going to start by finding the value of the vertical intercept. Remember, the vertical intercept is the point where Tyrone spends all of his income on notepads.
If Tyrone's income is 100 dollars and notepads cost 2 dollars, he can consume 50 notepads.
(Description)
The point with coordinates, 0 and 50, is briefly labeled as Intercept equals 100 dollars divided by 2 dollars.
(Speaker)
The horizontal intercept is the point where Tyrone spends all of his income on cafeteria meals.
If Tyrone's income is 100 dollars and cafeteria meals cost 5 dollars, he can purchase 20 meals.
(Description)
The point with coordinates, 20 and 0, is briefly labeled as Intercept equals 100 dollars divided by 5 dollars.
(Speaker)
Finally, the slope of the budget constraint is equal to the negative of the vertical intercept divided by the horizontal intercept, or negative 50 divided by 20, which is negative 2.5.
(Description)
The line connecting vertical and horizontal intercepts is labeled as Slope equals -50 divided by 20 equals -2.5.