orge and Kailani are both avid coffee drinkers, and they both have an annual budget of $140 to spend on coffee. There are two kinds of coffee, those sponsored by an organization called Ultra Coffee (X) and All Others (Y). The price of a bag of Ultra Coffee is $20 /bag and the price of all other coffee is $10 /bag. a. Show the budget constraint. Label it BC. Special #1: Ultra Coffee allows you to join a Special Coffee Tier. For an annual fee, $20, the price of a bag of coffee is a half of the original price ($10). In other words, once you have paid Ultra Coffee $20, the price of all bags of Ultra Coffee is $10. Everyone is eligible to join the Special Coffee Tier if they pay the fee, and the reduced price is only available to tier members. b. Draw this budget constraint and label it BC 1
​ . (hints: What are the endpoints of the BC ? What does paying the fee do to income? What does the price change from $20 to $10 do to the slope?) c. Write the equation(s) for the new budget constraint. d. Is the opportunity cost of a bag of Ultra Coffee constant along the budget constraint? If not, how does it change? Special #2 Ultra Coffee also offers a second special offer called Frequent Buyer Tier. There is no fee to join, but the first 3 bags are $20, and all additional tours over 4 are only $5. e. Draw this budget constraint and label it BC 2
​ . Think hard about the endpoints! f. Is your opportunity cost of a bag of Ultra Coffee constant along the budget constraint? If not, how does it change? g. If Jorge really likes Ultra Coffee, would he want to join a Tier? If so, which one? h. If Kailani really likes Y, All Other Coffee, would she want to join a Tier? If so, which one?