Suppose consumption bundle A contains 2 books and 5 candy bars, consumption bundle B contains 4 books and 4 candy bars, and consumption bundle C contains 3 books and 2 candy bars. Between which two bundles is it NOT possible for a consumer to be INDIFFERENT? a. Consumption bundle A and consumption bundle C b. Consumption bundle A and consumption bundle B c. Consumption bundle B and consumption bundle C
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Suppose consumption bundle A contains 2 books and 5 candy bars, consumption bundle B contains 4 books and 4 candy bars, and consumption bundle C contains 3 books and 2 candy bars. Between which two bundles is it NOT possible for a consumer to be INDIFFERENT?
a. Consumption bundle A and consumption bundle C b. Consumption bundle A and consumption bundle B c. Consumption bundle B and consumption bundle C
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- Q. 2 A student living in a university hostel has two options for meals: eating at the dining hall for Rs.600 per meal, or eating a meal at Dhaaba for Rs.150 per meal. His weekly food budget is Rs.6000. i) Draw the budget constraint showing the trade-off between dining-hall meals and meals at Dhaaba. Assuming that he spends equal amounts on both goods, draw an indifference curve showing the optimum choice. Label the optimum as point A. ii) Suppose the price of a Dhaaba meal now rises to Rs.200. Using your diagram from part (a), show the consequences of this change in price. Assume that our student now spends only 30 percent of his income on dining-hall meals. Label the new optimum as point B. iii) What happened to the quantity of meals at Dhaaba consumed as a result of this price change? What does this result say about the income and substitution effects? Explain. iv) Use points A and B to draw a demand curve for meals at Dhaaba. What is this type of good called?Suppose you have an income of $24 and the only two goods you consume are apples (x1) and peaches (x2). The price of apples is $4 and the price of peaches is $3. Suppose that your optimal consumption is 4 peaches and 3 apples. a. Illustrate this in a graph using indifference curves and budget lines. b. Now suppose that the price of apples falls to $2 and I take enough money away from you to make you as happy as you were originally. Will you buy more or fewer peaches? Provide a graphical representation.Consider two normal goods: pepsi and pizza. if the price of pepsi decreases then the consumption of pizza must go down.
- Jane is your typical economics student who consumes two goods: economics textbook and coffee. Jane’s income is $40. She can spend it all on books and get 5 or she can spend it all on coffee and get 20 cups.Given this information, construct the equation for Jane’s budget line and plot it (put books on the x–axis and coffee on the y–axis) The following are bundles that Jane can afford with her income (as shown in Table 3.1):Table 3.1BooksCoffee 1- -0 -8 2- Fill in the blanks in the table with quantities that can exhaust Jane’s income. Assume that prices are the same as used in part (a). If marginal utility of a book is 20, what is the marginal utility of coffee if she is maximizing utility?1. Rajesh and Priya consume two goods, apples (A) and mangoes (M). Now suppose that Rajesh's utility function is U*(A, M) = 0.2 In(A) + 0.8 In(M) and Priya's utility funtion is UP (A, M) = 0.8 In(A) + 0.2 In(M).The economy as a whole is endowed with 100 apples and 50 mangoes. Assume for simplicity that the price of apple is normalized to PA = Rs. 1. (i) Solve for the marginal rates of substitution between apples and mangoes for Rajesh and Priya, and show the condition that represents Pareto efficient allocation in apples and mangoes. (ï) Now calculate Rajesh and Priya's demands for A and M as a function of Prices P and Income I. (iii) Assume that Rajesh has 80 apples and 10 mangoes. Using Rajesh and Priya's respective MRS between the two goods, and the given societal endowment, solve for the equilibrium price ratio. Calculate the quantities consumed by each individual in equilibrium. Draw the equilibrium in an Edgeworth Box diagram, making sure to label the equilibrium point and price…Take the general case where your income is I, the price of coconuts is Pc and the price of pineapples is Pp. Now—let’s introduce a change. Assume that your income falls, but that the prices of the goods remains the same and answer the questions below: How does this change your budget constraint? Does the slope change? Why or why not? Compare the economic interpretation of the slope in this example with the starting one. Is the consumer able to afford more or less consumption bundles as a result of the decrease in your income? Then we would like you to investigate what happens to the budget constraint if the prices of coconuts and pineapples and your income increase by the same amount—with all other things remaining equal: How does this change your budget constraint? Does it shift or does it rotate? Is the consumer able to afford more or less consumption bundles as a result of the increase in the consumer’s income? In carrying out this activity, please make sure to explain your…
- Ravi has £21 to spend on pastries and biscuits. If he spends all the money on pastries, he can afford 15 pastries. The slope of Ravi's budget line (assuming his pastries consumption is measured on the horizontal axis and his biscuits consumption is measured on the vertical axis) is -3.5 (3.5 in absolute terms). a) Calculate the price of a pastry and the price of a biscuit. Write down Ravi's budget equation and draw the corresponding budget line. Mark the consumption bundle mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. b) Discuss how Ravi's budget set would change if his budget doubles. Show the relevant changes graphically. How could the price of a pastry increase so that Ravi could still afford to buy 15 pastries? c) Discuss how Ravi's budget constraint would change if the government imposed a tax of £0.50 per pastry and £0.50 per…Suppose you have $30 and you are going to rent some movies and buy some sodas. Suppose movie rentals are $6.00 each and sodas are $1.00 each. Your original consumption bundle is 3 movies and 12 sodas. (Hint: put movie rentals on the X axis) a)Draw your budget line showing the different combinations of Movies that you can rent and sodas that you can purchase. b)Suppose that movie rentals turn out to be half off ($3.00). Draw your new budget line on the same graph.The budget set, or budget constraint, in the graph shows the possible combinations of brownies and ice cream cones that can be purchased. Assume that this person has a total of $18 to spend on brownies and ice cream cones. How much does a brownie cost? $ Assume that at point A, the marginal utility from a brownie is 10 and the marginal utility for an ice cream cone is 18. This person should consume more brownies and fewer ice cream cones. is utility maximizing. should consume more ice cream cones and fewer brownies.
- MICROECONOMICS Clara is leaving for the university restaurant with 3000 HUF in her pocket. Clara is only interested in two things; grilled chicken (x) and salad (y). One slice of grilled chicken costs 300 HUF and the price of 100 grams of salad is 500 HUF. What is the slope of Clara's budget line assuming that she spends her entire budget on these two items and she measures her consumption of grilled chicken on the horizontal axis and salad on the vertical one? (Please use two decimals in your answer.)Suppose that Joe consumes cupcakes and pizzas. The price of cupcakes is $5 per unit and the price of pizzas is $10 per unit. The table shows Joe's utility from the consumption of each good; each row represents a possible consumption bundle. Currently, Joe is consuming 18 cupcakes and 9 pizzas. A Quantity of cupcakes 10 12 14 16 18 20 22 24 26 Utility of cupcakes (utils) 50.00 68.30 81.00 89.00 93.70 96.40 97.74 98.20 98.56 Q of pizzas 5 13 12 11 10 8 7 6 9 Utility of pizzas (utils) 263.00 258.00 250.00 240.00 227.00 212.00 195.00 175.00 150.00 Show Transcribed Text n a. Calculate the marginal utility per dollar of going from eight to nine pizzas. b. To increase total utility without increasing spending, should Joe change the amount of consumption of either good? OYes, Joe should choose more cupcakes and fewer pizzas. O Yes, Joe should choose more cupcakes and more pizzas. O No, Joe is already consuming at the optimal consumption bundle. O Yes, Joe should choose fewer cupcakes and more…The graph shows two budget lines and six consumption points (A, B, C, D, E, and F) for Pepsi and Dr Pepper. Note that budget line 1 is before the increase in Fred's income, whereas budget line 2 is after the increase in Fred's income. Assume that the consumer, Fred, attempts to maximize his utility and exhausts his budget on the two goods. If Fred's income increases, the movement from point A to point E is consistent with Pepsi being a normal good and Dr Pepper being an inferior good. If Fred's income increases, the movement from point A to point B is consistent with Dr Pepper being a normal good and Pepsi being an inferior good.
