A consumer has $10 to spend on potato chips and sodas. The potato chips cost $2 per bag and the sodas $1 per can. a) Draw the budget line at the original prices. b) Show graphically what happens to the demand for sodas if the price for potato chips decreases. Note that you first need to show what happens to the optimal choice of potato chips and sodas. Therefore, you need at least two graphs c) At the original price level, if the two goods are considered perfect substitutes. What will be the quantity demand for sodas and potatoes?

A consumer has $10 to spend on potato chips and sodas. The potato chips cost $2 per bag and the sodas $1 per can. a) Draw the budget line at the original prices. b) Show graphically what happens to the demand for sodas if the price for potato chips decreases. Note that you first need to show what happens to the optimal choice of potato chips and sodas. Therefore, you need at least two graphs c) At the original price level, if the two goods are considered perfect substitutes. What will be the quantity demand for sodas and potatoes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

John consumes 20 units of food and 24 units of clothing. If food is an inferior good, will John be indifferent between receiving a $24 gift certificate at a clothing store and receiving $24 in cash? Explain and show graphically.
1. a) Explain the nature of an indifference curve map, making reference to the graph below. QUANTITY (APPLES) 11 12 13 B QUANTITY (ORANGES) b) Show on the graph how a consumer could reach an equilibrium at point A with a given budget constraint. c) Show on the graph how this equilibrium would change if the price of oranges decreased. d) Identify on the graph the income and substitution effects of the price change, and explain the nature of these effects.
Please see the attached question.
Info in images
Solve these consumer choice problems: a. Suppose a consumer has a utility function u(x, y) = xy + 7y facing prices p,=S1 and p,=$2 and income I = $10. Draw a diagram and find the consumer's optimal consumption of goods x and y. b. Suppose that you are in a situation where you can afford purchasing 3 units of good x and 4 units of good y. You discover that another affordable bundle of 5 units of good x and 2 units of good y causes you to reach the same level of utility. Assume that your utility function and budget line are both well behaved. Are you maximizing your utility by consuming your original bundle? Why or why not? Propose an alternative, affordable bundle that would yield a higher utility level than either of the original bundles.
Please Explain
There are only two brands of tennis balls Tom purchases: "Wilson" and "Penn." The more he purchases of a ball, the lower the marginal utility of that ball. He spends all of his income and his marginal utility of a "Wilson" is 6 and his marginal utility of an "Penn" is 12. The price of a "Wilson" ball is $1 and the price of an "Penn" is $2. Which of the statements is true based on the above information? Question 19 options: Tom could increase his satisfaction by a) trading "Wilson" for "Penn." In equilibrium, Tom must give up b) three "Penn" balls for two "Wilson" balls. Tom can increase his satisfaction by c) doing nothing Tom would be willing to give up two d) "Penn" balls for one "Wilson" ball.
Question 2 Horatio consumes 20 fries and 12 shakes per week. The price of fries is $3 each and shakes are $5 each. 2.1 What is the amount of income allocated to shakes and fries consumption? 2.2 What is the price ratio (the price of shakes relative to the price of fries)? 2.3 If Horatio maximizes utility, what is the ratio of the marginal utility of shakes to the marginal utility of fries? (Hint: Start with the rule that you know and then use a bit of algebra.) 2.4 If the price of fries falls, will Horatio consume more fries, fewer fries, or the same amount of fries? Explain your answer using the rule of equal marginal utility per dollar, and include a rationale.
sketch a person’s indifference map and budget line for two goods, X on the horizontal axis and Y on the vertical axis. Mark the optimum consumption point. Now illustrate the following (you might need to draw a separate diagram for each): (a) A rise in the price of good X (a normal good), but no change in the price of good Y. (b) A shift in the person’s tastes from good Y to good X. (c) A fall in the person’s income and a fall in the price of good Y, with the result that the consumption of Y remains constant (but that of X falls).
True or false. A budget constraint, budget line or budget set is a graphical way to illustrate all possible combinations of two goods that a person can afford.
Suppose the marginal utiliy of a Coke is 15 utils and the price is $1. The marginal utility of a pizza is 20 utils and its price is $2. If you buy 1 unit each will you achieve consumer equilibrium? If not how can greater total equilibrium be obtained?
Lisa consumes only two goods, pizzas and burritos. In equilibrium, her marginal utility per slice of pizza is 10 and her marginal utility per burrito is 8. Instructions: Enter your answer rounded to two decimal places. If a slice of pizza costs $3, then the price of a burrito must be $