EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 2, Problem 9RQ
To determine
To discuss the preference of consumer with the change in the
Expert Solution & Answer
Explanation of Solution
Budget Constraint: It shows all the possible combination of two goods that a consumer can purchase, given the level of income of consumer and market prices.
The budget line rotates (inwards or outwards) with a change in the price of any of the two goods and the budget line shifts (inwards or outwards) with a change in the income of consumer.
On the consumption of the first 1,000 kilowatt units of electricity, the consumer is charged $0.10 per kilowatt.When the consumer consumes more than 1,000-kilowatt units, the consumer is charged $0.15 for each extra kilowatt.
This price change over 1,000 kilowatt makes use of electricity more expensive and makes the consumer budget line steeper after the consumption of 1,000 kilowatts of electricity.
This will change consumer preferences regarding consumption of electricity and consumer will try to consume up to 1,000 kilowatts to maximize his/her utility.
As shown in the below diagram the consumer is maximizing his utility at the consumption of 1,000 kilowatts of electricity.
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Students have asked these similar questions
Raymond consumes meatloaves and pineapples. He has decided that hismonthly budget will be $1500. Suppose that one meatloaf costs $375, while one pineapple costs $150.
Suppose Raymond decides to cut his monthly budget in half. Coincidentally, the next time he shops, he learns that meatloaves and pineapples are on sale for half price. Show what happens to Raymond’s budget line?
Suppose John decides to buy 4 units of food and 4 units of clothing with his $12 budget. Would his marginal utility per dollar spent on food be greater than or less than his marginal utility per dollar spent on clothing? What does this tell you about how he should substitute food for clothing if he wanted to increase his utility without spending any more money?
Your parents give you $500 per month to spend on college expenses or other personal expenses. Your parents change their mind,
and decide to make a matching offer. They will give $0.25 for every $1 you spend on college expenses, but only up to $100 extra.
Graph the effect of a matching allowance increase of $0.25 for each dollar you spend on college expenses, with a $100 limit, on
your budget constraint.
Chapter 2 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 2.1 - Prob. 1TTACh. 2.1 - Prob. 2TTACh. 2.3 - Prob. 1MQCh. 2.3 - Prob. 2MQCh. 2.3 - Prob. 1TTACh. 2.3 - Prob. 2TTACh. 2.3 - Prob. 1.1MQCh. 2.3 - Prob. 2.1MQCh. 2.5 - Prob. 1TTACh. 2.5 - Prob. 2TTA
Ch. 2.7 - Prob. 1MQCh. 2.7 - Prob. 2MQCh. 2.7 - Prob. 3MQCh. 2.8 - Prob. 1MQCh. 2.8 - Prob. 2MQCh. 2.8 - Prob. 1.1MQCh. 2.8 - Prob. 2.1MQCh. 2 - Prob. 9RQCh. 2 - Prob. 2.1PCh. 2 - Prob. 2.2PCh. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Prob. 2.5PCh. 2 - Prob. 2.6PCh. 2 - Prob. 2.7PCh. 2 - Prob. 2.8PCh. 2 - Prob. 2.9PCh. 2 - Prob. 2.10P
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