ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Options for all of them: blue one, red one, neither blue or red

4th option: homthetic preference, quasilinear preference, revealed preference

**Text Description:**

Consider a person who is endowed with 10 units of P and 10 units of G.

- If you observe the person not buying or selling Good P and G, the person’s BL is the [Select].

- If you observe the person selling G and using the proceeds to buy P, the person’s BL is [Select].

- If you observe the person selling P and using the proceeds to buy G, the person’s BL is [Select].

- This is an example of [Select].

**Graph/Diagram Explanation:**

The graph below the text illustrates a budget line (BL) and indifference curves (IC) in a standard microeconomic setting. The axes represent the quantities of two goods: Good P on the vertical axis and Good G on the horizontal axis.

1. **Endowment Point (10, 10):** The initial endowment point is marked at (10, 10), meaning the person starts with 10 units of Good P and 10 units of Good G.

2. **Budget Lines:**
   - The initial budget line is shown in blue.
   - A red budget line indicates the situation where the person has sold some units of G to buy more units of P.
   - A different budget line is likely implied where the person sells units of P to purchase G.

3. **Indifference Curves:**
   - IC₁, IC₂, and IC₃ represent different levels of utility.
   - Each indifference curve shows combinations of Good P and Good G that provide the same level of satisfaction to the person.
   - The higher the indifference curve (further from the origin), the higher the level of utility.

4. **Points on the Graph:**
   - Point W denotes an intersection on the blue budget line.
   - Point S marks a spot on the x-axis, indicating a certain amount of Good G being consumed.
   - Point T is marked on the horizontal axis, indicating the full consumption of Good G under one scenario.
   - Point X shows another combination of goods on the red budget line.

This graph and the corresponding choices demonstrate the decision-making process in terms of exchanging or maintaining goods, reflecting concepts such as opportunity cost and preference satisfaction. The example might illustrate a consumer choice theory problem or a budget constraint adjustment scenario.
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Transcribed Image Text:**Text Description:** Consider a person who is endowed with 10 units of P and 10 units of G. - If you observe the person not buying or selling Good P and G, the person’s BL is the [Select]. - If you observe the person selling G and using the proceeds to buy P, the person’s BL is [Select]. - If you observe the person selling P and using the proceeds to buy G, the person’s BL is [Select]. - This is an example of [Select]. **Graph/Diagram Explanation:** The graph below the text illustrates a budget line (BL) and indifference curves (IC) in a standard microeconomic setting. The axes represent the quantities of two goods: Good P on the vertical axis and Good G on the horizontal axis. 1. **Endowment Point (10, 10):** The initial endowment point is marked at (10, 10), meaning the person starts with 10 units of Good P and 10 units of Good G. 2. **Budget Lines:** - The initial budget line is shown in blue. - A red budget line indicates the situation where the person has sold some units of G to buy more units of P. - A different budget line is likely implied where the person sells units of P to purchase G. 3. **Indifference Curves:** - IC₁, IC₂, and IC₃ represent different levels of utility. - Each indifference curve shows combinations of Good P and Good G that provide the same level of satisfaction to the person. - The higher the indifference curve (further from the origin), the higher the level of utility. 4. **Points on the Graph:** - Point W denotes an intersection on the blue budget line. - Point S marks a spot on the x-axis, indicating a certain amount of Good G being consumed. - Point T is marked on the horizontal axis, indicating the full consumption of Good G under one scenario. - Point X shows another combination of goods on the red budget line. This graph and the corresponding choices demonstrate the decision-making process in terms of exchanging or maintaining goods, reflecting concepts such as opportunity cost and preference satisfaction. The example might illustrate a consumer choice theory problem or a budget constraint adjustment scenario.
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So is this an example of: hometheic preferences, quasilinear preferences, or revealed preferences?

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So is this an example of: hometheic preferences, quasilinear preferences, or revealed preferences?

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