2. Zhoran has a budget of $36 for fruit. Strawberries cost $4 per pound and grapes cost $3 per pound. She likes both type of fruit and she has a diminishing marginal rate of substitution. (a) Draw a diagram illustrating Zhoran's budget constraint. Label both intercepts with their numerical values. What is the slope of her budget line? (b) Illustrate Zhoran's optimal combination of strawberries and grapes on your dia- gram. Any picture that is consistent with the facts described here is acceptable. Explain how your diagram demonstrates that the point you've chosen is the op- timal point for Zhoran.
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Consumer will maximise utility at a point where slope of an indifference curve is equal to the slope of a budget line.
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- Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.Name: Maximizing Utility The following table shows represents the utility received by Sharon for cookies and pretzels. Fill in the missing data. Total Marginal Utility Utility # of pretzels # of Marginal Utility Utility Total cookies --- --- 1 20 1 12 2 10 2 8 3 5 3 4 4 4 5 32 5 20 28 -10 Use the above completed table to answer the folloiwng questions. If your budget is $ 5.00 and both cookies and pretxels cost $1.00 each, how many cookies and pretzels will you buy to maximize your utility? а. What will your total utility be?. Draw the student's budget constraint. Put burritos on the x-axis and sodas on the y-axis. A student has a monthly budget of $120 to spend on either burritos, which cost $6 each, or sodas, which cost $4 each.
- 1. An individual's budget Suppose Darnell has a weekly budget of $32 to spend on ranch dressing and spinach. Ranch dressing is priced at $4 per bottle, and spinach is priced at $2 per container. If Darnell spends his entire $32 on ranch dressing, he can buy 16 containers of spinach. 8 bottles of ranch dressing. If he spends his entire $32 on spinach, he can buy Use the blue line (circle symbol) to plot Darnell's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of ranch dressing and spinach that are affordable for Darnell. Finally, place the black point (plus symbol) on the point on Darnell's budget constraint that corresponds to a scenario in which Darnell spends $16 on each good. Note: Dashed drop lines will automatically extend to both axes.7. Bob receives utility from days spent traveling on vacation domestically (D) and daysspent traveling in a foreign country (F) as given by the utilityU(D; F) = DFThe price of a day spent traveling domestically is 160 pounds and in a foreigncountry 200 pounds. Bobís annual budget for traveling is 8000 pounds. (a) Find Bobís utility maximising choice of days traveling domestically and of daystravelling in a foreign country. Find also his utility level from consuming thatbundle. Suppose that the price of domestic traveling increases to 250 pounds per day.Denoting his budget for traveling x, (suppose by now that it is unknown) findthe demand for D and F under the new prices as a function of x.Consumer choiceJo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The priceof muffins is $1.25. The price of cupcakes is $1.75.a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of thequantity of muffins.b) Show Jo’s budget constraint on a graph. Let quantity of muffins be on the horizontal axis. Letquantity of cupcakes be on the vertical axis.c) Show the following consumption bundles (points) on the graph. Calculate the cost of eachconsumption bundle and state which one of them are feasible.• Point A: 49 muffins and 3 cupcakes.• Point B: 38 muffins and 15 cupcakes.• Point C: 24 muffins and 24 cupcakes.• Point D: 14 muffins and 30 cupcakes.
- A student has a monthly budget of $120 to spend on eitherburritos, which cost $6 each, or sodas, which cost $4 each.1. What is the largest number of burritos that the studentcould afford to purchase in one month?2. What is the largest number of sodas the student couldafford to purchase in one month?3. Draw the student's budget constraint. Put burritos on thex-axis and sodas on the y-axis.Graded Assignment due Monday4. Which combinations of burritos and sodas are unaffordable--those tothe left of the line in the graph or those above the line in the graph? Why?5. Which combinations would leave some budget unspent - those to theleft of the line in the above graph or those to the right of the line in theabove graph?6. What is the equation for the student's budget constraint? In yourequation, use Q1 as the variable to represent the quantity of burritos andQ2 to represent the quantity of sodas.7. What is the opportunity cost of a burrito?8. What is the opportunity cost of a soda?9. The local…Consumer choiceJo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The priceof muffins is $1.25. The price of cupcakes is $1.75.a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of thequantity of muffins.b) Show Jo’s budget constraint on a graph. Let quantity of muffins be on the horizontal axis. Letquantity of cupcakes be on the vertical axis.c) Show the following consumption bundles (points) on the graph. Calculate the cost of eachconsumption bundle and state which one of them are feasible.• Point A: 49 muffins and 3 cupcakes.• Point B: 38 muffins and 15 cupcakes.• Point C: 24 muffins and 24 cupcakes.• Point D: 14 muffins and 30 cupcakes.d) Which of these four points can be Jo’s optimal consumption bundle? Why?e) The price of cupcakes decreased to $1.5. Provide an example of a consumption bundle thatbecame feasible now but wasn’t feasible before the decrease in price. Calculate the cost ofthis consumption bundle…A penurious graduate student has a food budget of $100.00/week. To survive with sufficient energy to attend classes, he knows that he needs to consume 50 protein units per week. The only two foods he can stand to eat on a regular basis are beans and hamburger. He derives twice as ich pleasure per protein unit from eating hamburger as he does from beans. a. Assume that hamburger costs $3.00 per protein unit and beans cost $1.00 per protein unit. Formulate the student's diet problem as a linear program. (You can assume he wants to maximize his "total utility" from his diet and that he gets I utile from each protein unit of beans he consumes and 2 utiles from each pro- tein unit of hamburger.) What is the optimal consumption of beans and ham- burger in this case? b. Plot the student's price-response curve for beans as the price of beans goes from $0.01 to $2.00, assuming that everything else (including the price of hamburger) stays constant. Note that his individual price-response…
- Which budget constraint panel in Figure below shows the combined effects of an increase in the price of oranges and a decrease in the price of apples? (b) (c) (d) Oranges Oranges Oranges KREKE Apples -(a) Oranges Apples O panel a panel b panel c Apples O panel e Onone of the above Apples (e) Oranges Apples1. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal1.Enumerate at least five interpretations of the graph of the Total Utility curve2.Enumerate at least five interpretations of the graph of the Marginal Utility curve