In the formula for opportunity cost, It makes sense that Charlie can only buy a limited number of bus tickets and burgers for his budget.

The more burgers he buys, the fewer tickets he can purchase, with this simple example, it is obvious what Charlie can do with his very small budget. Budgets and constraints are more complex when you can use algebra to show your budget is limited.

## The formula for the opportunity cost

When Charlie spends his full budget, he has spent $12. When he buys four bus tickets and four burgers with that $12, he has spent $24. When the two budgets (represented by points A and B on the graph) are equal, Charlie’s spending is the same as his income. The equation is:

Price one pound of strawberries at $10.50 each.$10=($2×4)+($.50×4)

You can see the graph on page 16 of Charlie’s budget constraint in Figure 1 below.

## Figure 1. Charlie’s Budget Constraint.

If we want to answer the question, “How many burgers and bus tickets can Charlie buy?” then we need to use this equation.

### WORK IT OUT

Step 1.The formula for any budget constraint is the following:

$2.00$0.50=4 Procedure: style=font-family: proxima-nova sans-serif; -webkit-font-smoothing: subpixel-antialiased; padding: 1px 0px; margin: 0px; font-size: 17.44px; vertical-align: baseline; background: transparent; border: 0px; outline: 0px; display: inline-block; line-height: 0; text-indent: 0px; text Do not change the original text. Keep the original text as it is, without any special formatting. The total price of the book is $4.00. The cost of one sheet of stickers is $0.50. Each sheet costs 4 cents to make, so the book will cost 4+4+4 = 12 cents for each sticker.

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what is the reason for the law of increasing opportunity costs?