Economics

Creating a Budget Constraint Graph

Directions:
Sarah is going to the movies and she has $10 to spend on snacks. Smoothies are $3
and candy bars are $1 each. She will be spending all of the $10.

Budget: $10
Smoothies: $3
Candy bars: $1

Draw a line graph that represents the budget constraints and possible purchasing
options that Sarah has with her $10. Use the grid below and either draw the graph by
hand or use Word Art or Google Draw to draw and label the graph. You will need to
include the following:

 Numbers for the X-axis and Y-axis (2 pts)

 A line (also called a curve) connecting the points that represent possible
purchase combinations (3 pts)

Refer to the completed graph to answer the questions on the next page.
 Smoothies

Questions:
Answer each question using complete sentences. (5 points each)

1. If Sarah decides to purchase two smoothies, how many candy bars will she be able to
purchase?

She will be able to buy 4 candy

Candy bars

2. What is the opportunity cost Sarah faces if she elects to purchase 10 candy bars?

She would get more stuff with the same amount of money unlike if she bought smoothies
she would lose 3 candys per smoothie

3. How could the concept of diminishing marginal utility be illustrated considering Sarah’s
possible decisions?

Her concept of diminishing marginal if she picked 10 candy bars

Quantity of candy Marginal Utility Total Utility

0 0 0
1 10 10
2 9 19
3 8 27
4 7 34
5 6 40
6 5 45
7 4 49
8 3 52
9 2 54
10 1 55

Original content 2019 by Michigan Virtual, remixed by Idaho Digital Learning Alliance, and licensed under CC BY-NC-SA 4.0