Exploring Economics
8th Edition
ISBN: 9781544363356
Author: Robert L. Sexton
Publisher: Sage Publications
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Chapter 10, Problem 10P
To determine
The behaviour assumed in the
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A consumer has two goods in his consumption bundle: bread and coffee. The current price of bread is $3.00 per loaf and the price of coffee is $6.00 per cup.
(enter your response round to one or two decimal places as appropriate).
What is the relative price of bread to coffee? (bread per unit of coffee)?
Suppose that the price of bread increases by 10% and the price of coffee increases by 20%
The relative price (bread per unit of coffee) has
Based on the substitution effect, we would expect our consumer to buy relatively more bread, relatively more coffee or make no change to this consumption bundle?
A basket of goods for a given consumer includes two goods, X and Z. Consumer income is equal to $1,500 and the prices of these two goods are as follows:
P= $20
P, = $25
This consumer is consuming 10 units of good X.
Suppose that over the course of a year, the price of good X changes by 10% and the price of good Z changes by - 10%.
How much income would be required for the consumer to afford the same quantity of goods X and Z with the new prices? S
In 2005, Sam survives on peanuts and lemonade. A bag of peanuts costs $1, and a bottle of lemonade costs $2. His weekly income is $30. He buys 10 bags of peanuts and 10 bottles of lemonade each week. In 2006, his weekly income rises to $40. At the same time, the price of peanuts rises to $1.50 and the price of lemonade rises to $2.50.
Sam is equally well off in both years
Sam is better off in 2005
Sam is better off in 2006
We don't have enough information to say whether Sam is better off in 2005 or 2006.
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