Posted: January 18th, 2023
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You have an income of $100,000. You can buy an electric car (which costs $60,000) or an internal-combustion car (which costs $30,000). The electric car has a lower mileage than an internal-combustion car: it costs you $1 to drive 1 km if you decide to buy an electric car, but it costs you $2 to drive 1 km if you decide to buy an internal-combustion car. You enjoy driving (measured in kilometers driven) and spending on other goods (measured in dollars).
Draw your budget line if you buy an electric car. What is its slope and what is the economic meaning of its value?
Draw your budget line if you buy an internal-combustion car. What is its slope and what is the economic meaning of its value?
Given than you can choose the type of car you buy, what is your budget line?
You have chosen to drive 35,000 kilometers. Add whatever line/curve you need to the diagram you used to answer question 3 to show your choice. What type of car have you decided to buy?
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