Figure 10-8

Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group Pilates class is $20 and the price of a group Yoga class is $10. Manuri's optimal bundle is given by "A" in Figure 10-8.
-Refer to Figure 10-8.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.What is her new optimal bundle?

Question

Figure 10-8
  
Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group Pilates class is $20 and the price of a group Yoga class is $10. Manuri's optimal bundle is given by "A" in Figure 10-8.
-Refer to Figure 10-8.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.What is her new optimal bundle?

Quizplus · Accepted Answer

When the price of Pilates sessions increases to $30, the consumer's budget constraint changes, making Pilates sessions more expensive relative to Yoga sessions. The new optimal bundle will be where the consumer maximizes utility given the new prices, which is likely to be at bundle C, assuming it reflects a combination of goods that aligns with the new budget constraint and utility maximization.

Figure 10-8 Manuri Has $300 to Spend on Pilates Classes and Yoga