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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2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current in come is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?

Currently, Paula is maximizing utility by purchasing five TV dinners (T) and four LeanCuisine Meals (L) each week. Suppose both T and L cost $5 each.a. Graph Paula’s initial utility-maximizing choice.b. Suppose the price of T falls by $1 and the price of L rises by $1.25. Can Paula stillafford to buy her initial consumption choices? What do you know about her new budgetconstraint?c.  Make a new graph to show why Paula will choose to consume more T and less Lgiven her new budget constraint to maximize utility. Is her utility increased, decreased,or unchanged given the price change? [Hint: try to make the graph as big as possible tosee how the utility is tangent/intersects with the lines more easily] d. In part (b), suppose another scenario where the price of T rises by $1 and the priceof L falls by $1.25. Is Paula’s utility increased, decreased, or unchanged given the pricechange?

6. Reggie consumes only two goods: food and shelter. On a graph with shelter on the horizontal axis and food on the vertical axis, his price consumption curve for shelter is a vertical line. Draw a pair of budget lines and indifference curves that are consistent with this description of his preferences. What must always be true about Reggie's income and substitution effects as the result of a change in the price of shelter?

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8. Sara’s income is $12 a week. The price of popcorn is $3 a bag and the price of cola is $1.50 a can. The figure below shows Sara’s indifference curves for popcorn and cola. In the picture popcorn is on y-axis and cola on x-axis. a. What quantity of popcorn and cola does Sara buy to maximize her well being? What is Sara’s marginal rate of substitution at the point at which she consumes? b. Suppose that the price of cola rises from $1.50 to $3.00 a can while the price of popcorn and Sara’s income remain the same. What quantities of cola and popcorn does Sara now buy? c. What are two points on Sara’s demand curve for cola? Draw Sara’s demand curve.

Suppose that a household has a weekly budget of $200 a week for its weekly shopping trip when it spends its weekly budget on toilet paper priced at $0.50 per roll and other goods. a. Draw a large diagram showing the household's weekly budget constraint for rolls of toilet paper and $ of other goods. Label the axes, the intercepts, the budget constraint and give the diagram a title. b. If the toilet paper and other goods are perfect complements and the household is observed to buy 24 rolls of toilet paper per week, draw an indifference curve that indicates this situation. Label the household's demands for toilet paper rolls and other goods and its indifference curve. C. Suppose a quota is introduced limiting purchases of toilet paper to 12 rolls per weekly shop. On the diagram from a. and b., draw the household's budget constraint and the highest indifference curve the household can reach. Label the household's budget constraint, demand for toilet paper rolls and other goods and the…

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Ria earns an income of $2,000 per month Assume that she can either buy 5 laptops or 10 mobile phones with her income. The price of laptops is $400, and the price of the mobile phone is $200 Suppose Ria's income increases by 20% and the price of the laptops decreases to $300, what will be the offect on the budget constraint? 1) Using the line drawing fool, draw a new budget constraint representing the given effects Carefully follow the instructions above and only draw the required object The new budget constraint has a different than the initial budget constraint. CARD Quantity of mobile phone 11- 10- 8 9 10 11 12 Quantity of laptop ROO