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One of Matt's favourite brands is offering a deal on its’ hooded jackets, which is sold...

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Economics

One of Matt's favourite brands is offering a deal on its’ hoodedjackets, which is sold at $100 a piece. The promotion claims thatyou can “get the second piece 50% off.” It means, if Matt buys ajacket for $100, he can buy the second jacket (of different colour)for 50% of the original tag price, $50. In addition, if Matt wantsa third jacket, he has to pay $100 again, but now he has theprivilege to purchase the fourth jacket for $50, etc. Assume theprice for Other goods is $50 and Matt has an income of $1,000 tospend on both the jackets and Other goods.”

Draw Matt's budget constraint with jackets on the horizontalaxis.

Answer & Explanation Solved by verified expert
4.2 Ratings (598 Votes)
The total income of Matt is 1000The price of other goods is 50If Matt spends all his income onother goods then he can purchase a maximum of 100050 20 unitsof other goodsMatt makes the purchase of hoodedjackets as wellThe    See Answer
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