The nearby graph shows Charlie's budget constraint for purchases of shoes and purses. Number of 12 purses 10 8 6 4 2 0 Budget line with discount Budget line no discount 0.5 1 2 2.5 Number of pairs of shoes 1.5 If Charlie's monthly budget for shoes and purses is $100 and they buy more than 2 purses, the price of purses is $ _ (Enter your answer as integers without the dollar sign.)

1. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal

1. 2. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal rate of substitution? d. What two conditions must be met in order for Frank to maximize his utility? e. What are the utility maximizing quantities of plane trips and bus trips for Frank? Given income of $1000, Px = 25 and Py = 40, find (1) a function for the MRS and (2) the utility maximizing consumption bundle for each of the…

Luke has a monthly income of $80. He spends this money making telephone calls from home (measured in minutes of calls) and on other goods. His mobile phone company offers him two plans: Plan A: Pay no monthly fee and make calls for $0.50 per minute. Plan B: Pay a $30 monthly fee and make calls for $0.1 per minute.  Graph Luke’s budget constraint under each of the two plans.

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.

Your parents give you $500 per month to spend on college expenses or other personal expenses. Your parents change their mind, and decide to make a matching offer. They will give $0.25 for every $1 you spend on college expenses, but only up to $100 extra. Graph the effect of a matching allowance increase of $0.25 for each dollar you spend on college expenses, with a $100 limit, on your budget constraint.

Alex distributes his monthly income of $600 between two goods, movies and food. By spending his entire income on movies, he can enjoy a maximum of 20 movies. On the other hand, by spending his entire income on food he can consume a total of 60 units of food. Assume that food consumption is measured along the horizontal axis and the consumption of movies is measured on the vertical axis. Calculate the slope of Alex's budget line when the price of food increases to $20 while the price of movie remains unchanged. -2/3 - 1.5 -2 -3/4

Marie has a weekly budget of $2400, which she likes to spend on magazines and pies. If the price of one magazine is $40, what is the maximum number of magazines she can buy in a week? If the price of a pie is $120, what is the maximum number of pies she can buy in a week? Compute and show Marie’s budget schedule for pies and magazines. Draw Marie’s budget line with pies on the horizontal axis and magazines on the vertical axis.

Consider the following table, which listsJames’s marginal utility schedule for steak andhamburger meals:                                                                                                                                                          Given a budget of $45, how many steak and hamburgermeals will James buy per month to maximizehis total utility? What is the total utilityrealized?

9. Income and substitution effects Rajiv and Simone are two friends living in Denver who love to try different restaurants in their city, but have specific preferences regarding venues for certain meals. In particular, they like to eat out at upscale gastropubs for dinner and diners for brunch. On the following diagram, the purple curves 1₁ and 12 represent two of their indifference curves for upscale dinners and diner brunches. Assume that the friends have a monthly budget of $1,000 available to spend on going out to eat, and further, that the price of diner brunch always $10. Each labeled point represents tangency between a budget constraint and the corresponding indifference curve. DINER BRUNCHES 0 0 5 6 N | M BC, UPSCALE DINNERS H BC₂ (?