Question

You are responsible for investing a budget of $6 million into a portfolio of apartments i and detached houses (x). Your market research shows that each apartment is selling for $200,000 and each detached house is selling for $600,000. (a) Draw a budget constraint line for this portfolio (3 marks) (b) Using your findings from part (a), demonstrate how the budget constraint line will change if the budget for the portfolio increases to $9 million. (2 marks) (C) Demonstrate how the original budget constraint from part (a) changes when the price of apartments decreases to $100,000. (2 marks) (d) Demonstrate how your original budget constraint from part (a) changes when the price of a detached house increases to $1,000,000. (2 marks)

Answer 1

22.12.2017 @ 6 x pont folo x & Y budget = 6,000,000 prices of 200,000 - 600,000 600,ooo x + 200.000 y = 6,000, oooo if budget is 90088600 othen & Intercept : 45 (6oooook + 2000 Xintercept = 45 = 9,000,000 3025006 16 15 Pret 6000p - 1100,000 1180,000x + 200,000x = 6,80p,ood xintreept = 60 Xinterdept = 30 x origtney BOX x2 Py 2,000.00 1,00,000 -Gooooox + 1,00,000 X = 6,00,000) x=10 Y=60 Px from Bogooo - 1,000,000 1,000,000 X+ 2,00,000 y = 6,00,00 (Y=30) popoo x + 2,00 pool = 6,000,000