ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Julie buys food and other goods. She has an income of $400 per month. The price of food is initially $1.00 per unit. It then rises to $1.20 per unit. The prices of other goods do not change. To help Julie out, her mother offers to send her a check each month to supplement her income. Julie tells her mother, “Thanks, Mom. If you would send me a check for $50 per month, I would be exactly as happy paying $1.20 per unit as I would have been paying $1.00 per unit and not receiving the $50 from you.” Which of the following statements is true? Explain. The increased price of food has:a) an income effect of +$50 per monthb) an income effect of -$50 per month c) a compensating variation of +$50 per monthd) a compensating variation of -$50 per monthe) an equivalent variation of +$50 per monthf ) an equivalent variation of -$50 per montharrow_forwardWhat is “Compensating Variation”? What is “Consumer’s Surplus”? What is “Equivalent Variation”? What are they trying to measure?arrow_forwardQuestion 4 (Figure: Demand for Tuna Sandwiches) The graph shows Beatriz's weekly demand for tuna sandwiches. Tuna Sandwiches Price per sandwich $165 $12 $8 $4 0 Beatriz's individual demand curve Quantity of sandwiches (per week) If she orders three tuna sandwiches per week, what can we infer? The price of a tuna sandwich is no higher than $4. Beatriz's demand for tuna has shifted. O For Beatriz, tuna sandwiches are a normal good. O For Beatriz, tuna sandwiches are an inferior good.arrow_forward
- Can you determine the income effect of the price increase? If yes, how much is it? If not, why not?arrow_forwardFigure: Leonard's Demand for Pecan Pie) Look at Leonard's weekly demand curve for slices of pie. How many slices of pie is Leonard willing to buy at $3 per slicearrow_forwardThe graph represents a budget constraint showing the purchases of Good X and Good Y. If the price of good X falls, then budget constraint will move from budget constraintarrow_forward
- Which of the following will cause a movement when looking at an individual’s demand curve? Price The Availability of Alternative Goods Tastes and Preferences Changes in incomearrow_forwardQ22arrow_forwardThe following graph shows Hilary's weekly demand for cheesecake, represented by the blue line. Point A represents a point along her weekly demand curve. The market price of cheesecake is $3.00 per slice, as shown by the horizontal black line From the previous graph, you can tell that Hilary is willing to pay $_______ for her 8th slice of cheesecake each week. Because she has to pay only$3.00 per slice, the consumer surplus she gains from the 8th slice of cheesecake is $_______. Suppose the price of cheesecake were to fall to $2.25 per slice. At this lower price, Hilary would receive a consumer surplus of $_______.from the 8th slice of cheesecake she buys.The following graph shows the weekly market demand for cheesecake in a small economy. Use the purple point (diamond symbol) to shade the area representing consumer surplus when the price (P) of cheesecake is $3.00 per slice. Then, use the green point (triangle symbol) to shade the area representing additional consumer surplus when the…arrow_forward
- Joy’s budget permits her to spend $5,000 per month on either business travel or electronicmedia to transact business. The price of business travel was initially $1,000 per trip and theprice of electronic media was $500 per hour.a) Graphically sketch Joy’s budget line. b) Graphically illustrate how a 20 percent decline in the price of business travel would impact Joy’s budget set.c) Suppose that, after the price of business travel drops, Joy’s marginal rate of substitution between electronic media and business travel -1. Is she allocating resources efficiently? Explain.arrow_forwardExplain using words and graphs where an individual demand curve is derived(where do they come from)?arrow_forward10. What happens to the demand curve for an inferior good if a consumer's income increases? Show me using a diagram, please.arrow_forward
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