Homework Help is Here – Start Your Trial Now!
Business
Economics
The table below shows the total benefit, in dollars, that Diana derives from consuming two goods, Good G and donuts. Quantity of Good G Total Benefit of Good G 0 $0 $40 $70 $90 2 3 4 5 6 $100 $103 $105 Quantity of Donuts 0 1 2 3 4 5 6 Total Benefit of Donuts $0 $80 $120 $140 $152 $156 $156 Diana has a limited weekly income of $20, and she spends it all on Good G and donuts. Assume the price of Good G is $2 per unit and the price of a donut is $4. (a) Identify the quantity of Good G and the quantity of donuts that will maximize Diana's total benefit given her weekly income. Explain using marginal analysis. (b) Calculate Diana's consumer surplus from the fourth donut. Show your work. (c) If Diana's weekly income decreases from $20 to $18, would Diana be able to buy 5 units of Good G and 2 donuts? Explain using numbers.

The table below shows the total benefit, in dollars, that Diana derives from consuming two goods, Good G and donuts. Quantity of Good G Total Benefit of Good G 0 $0 $40 $70 $90 2 3 4 5 6 $100 $103 $105 Quantity of Donuts 0 1 2 3 4 5 6 Total Benefit of Donuts $0 $80 $120 $140 $152 $156 $156 Diana has a limited weekly income of $20, and she spends it all on Good G and donuts. Assume the price of Good G is $2 per unit and the price of a donut is $4. (a) Identify the quantity of Good G and the quantity of donuts that will maximize Diana's total benefit given her weekly income. Explain using marginal analysis. (b) Calculate Diana's consumer surplus from the fourth donut. Show your work. (c) If Diana's weekly income decreases from $20 to $18, would Diana be able to buy 5 units of Good G and 2 donuts? Explain using numbers.

Economics:
Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
Publisher:BOYES, William
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 1E
See similar textbooks
icon
Related questions
Question
The table below shows the total benefit, in dollars, that Diana derives from consuming two goods, Good G and donuts. Quantity of Good G 0 1 2 3 4 5 6 Total Benefit of Good G $0 $40 $70 $90 $100 $103 $105 Quantity of Donuts 0 1 2 3 4 5 6 Total Benefit of Donuts $0 $80 $120 $140 $152 $156 $156 Diana has a limited weekly income of $20, and she spends it all on Good G and donuts. Assume the price of Good G is $2 per unit and the price of a donut is $4. (a) Identify the quantity of Good G and the quantity of donuts that will maximize Diana's total benefit given her weekly income. Explain using marginal analysis. (b) Calculate Diana's consumer surplus from the fourth donut. Show your work. (c) If Diana's weekly income decreases from $20 to $18, would Diana be able to buy 5 units of Good G and 2 donuts? Explain using numbers. (d) Suppose that donuts are produced in a perfectly competitive market and the price of sugar, an input to the production of donuts, increases. If donuts are a normal good, will the quantity of donuts that will maximize Diana's total benefit increase, decrease, or stay the same? Explain. (e) Suppose instead that the price of Good G increases by 9% and Diana buys 6% less of Good G and 3% fewer donuts. Based on this change, identify whether Good G and donuts are substitutes, complements, or not related. Explain using numbers.
Transcribed Image Text:The table below shows the total benefit, in dollars, that Diana derives from consuming two goods, Good G and donuts. Quantity of Good G 0 1 2 3 4 5 6 Total Benefit of Good G $0 $40 $70 $90 $100 $103 $105 Quantity of Donuts 0 1 2 3 4 5 6 Total Benefit of Donuts $0 $80 $120 $140 $152 $156 $156 Diana has a limited weekly income of $20, and she spends it all on Good G and donuts. Assume the price of Good G is $2 per unit and the price of a donut is $4. (a) Identify the quantity of Good G and the quantity of donuts that will maximize Diana's total benefit given her weekly income. Explain using marginal analysis. (b) Calculate Diana's consumer surplus from the fourth donut. Show your work. (c) If Diana's weekly income decreases from $20 to $18, would Diana be able to buy 5 units of Good G and 2 donuts? Explain using numbers. (d) Suppose that donuts are produced in a perfectly competitive market and the price of sugar, an input to the production of donuts, increases. If donuts are a normal good, will the quantity of donuts that will maximize Diana's total benefit increase, decrease, or stay the same? Explain. (e) Suppose instead that the price of Good G increases by 9% and Diana buys 6% less of Good G and 3% fewer donuts. Based on this change, identify whether Good G and donuts are substitutes, complements, or not related. Explain using numbers.
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Personal Budget
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Economics:
Economics:
Economics
ISBN:
9781285859460
Author:
BOYES, William
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
Economics
ISBN:
9781285635101
Author:
MCEACHERN
Publisher:
Cengage
Micro Economics For Today
Micro Economics For Today
Economics
ISBN:
9781337613064
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS