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Question: a sports facility with a budget of 240 faces prices...

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A sports facility with a budget of $240 faces prices of $6 per basketball and $5 per volleyball. In equilibrium, the sports facility purchases 8 basketballs and 16 volleyballs. Suppose the sports facility can join a sports equipment buyer’s club. For a $60 fee, they can purchase at the lower prices of $3 per basketball and $4 per volleyball.

a) draw the budget constraint for the sports facility in the buyers’ club.

b) Can they buy the same combination of goods purchased previously ($8 & $16)? Explain.

c ) Should the sports facility join the buyers’ club?

d ) Will the consumer’s optimal (utility-maximizing) combination of basketballs and volleyballs change? Why or why not?

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