4. Deriving demand from an indifferent map Juanita live in Denver and enjoys drinking lathes and eating scones. The price of a latte is held constant at $3 throughout this problem On the following graph, the purple curves (U and Us) represent two of Juanita's indifference curves. The lines BC, and BC show two budget constraints Points X and Y show Juanita's optimum consumption bundles subject to these budget constraints. LATTES 10 SCONES 10 (?) Given the preceding graph and knowing the price of a latte is $3, Juanda's available income for lattes and scones is Using the income amount you just computed, complete the following table by finding the price of a scone when BC, represents Judg constraint and when BC represents her budget constraint. Then indicate the quantity of scones consumed in each of those s Price When Juanita's budget constraint is... (Dollars per scone) BC BC₁₂ Consumption (Scones) Gen the price-quantity combinations from the preceding table, use the blue line (cecle symbol) to plat Juanita's demand for scones on the following graph Hint. Assume that Juanita's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blat line on the following graph so that it passes through these two points. (and ac 6 . 10 QUANTITY(S) M 1 20 D 7
4. Deriving demand from an indifferent map Juanita live in Denver and enjoys drinking lathes and eating scones. The price of a latte is held constant at $3 throughout this problem On the following graph, the purple curves (U and Us) represent two of Juanita's indifference curves. The lines BC, and BC show two budget constraints Points X and Y show Juanita's optimum consumption bundles subject to these budget constraints. LATTES 10 SCONES 10 (?) Given the preceding graph and knowing the price of a latte is $3, Juanda's available income for lattes and scones is Using the income amount you just computed, complete the following table by finding the price of a scone when BC, represents Judg constraint and when BC represents her budget constraint. Then indicate the quantity of scones consumed in each of those s Price When Juanita's budget constraint is... (Dollars per scone) BC BC₁₂ Consumption (Scones) Gen the price-quantity combinations from the preceding table, use the blue line (cecle symbol) to plat Juanita's demand for scones on the following graph Hint. Assume that Juanita's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blat line on the following graph so that it passes through these two points. (and ac 6 . 10 QUANTITY(S) M 1 20 D 7
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:4. Deriving demand from an indifferent map
Juanita live in Denver and enjoys drinking lathes and eating scones. The price of a latte is held constant at $3 throughout this problem
On the following graph, the purple curves (U and Us) represent two of Juanita's indifference curves. The lines BC, and BC show two budget
constraints Points X and Y show Juanita's optimum consumption bundles subject to these budget constraints.
LATTES
10
SCONES
10
(?)
Given the preceding graph and knowing the price of a latte is $3, Juanda's available income for lattes and scones is
Using the income amount you just computed, complete the following table by finding the price of a scone when BC, represents Judg
constraint and when BC represents her budget constraint. Then indicate the quantity of scones consumed in each of those s
Price
When Juanita's budget constraint is... (Dollars per scone)
BC
BC₁₂
Consumption
(Scones)
Gen the price-quantity combinations from the preceding table, use the blue line (cecle symbol) to plat Juanita's demand for scones on the following
graph
Hint. Assume that Juanita's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then
place the blat line on the following graph so that it passes through these two points.
(and ac
6
. 10
QUANTITY(S)
M 1
20
D
7
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