EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14.3, Problem 2MQ
To determine
Reason for increase in r increases the relative price of
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For each of the following, graphically decompose the total effect of the price change into the substitution and income effects on a well-annotated graph. Be sure to clearly label each of the three effects.
2. Paula’s preferences for goods x and y are given by the utility function, U = x 1/2 y 1/2 . Her income is $160, and the price of good y is always $20. Suppose the price of x starts at $20 and then decreases to $5.
a. Calculate the income, substitution, and total effects of the price decrease on both goods. Show your work for full credit and round to 2 decimal places where appropriate.
b. Use a clearly labeled graph to illustrate the total, income, and substitution effects of the price decrease on Paula’s consumption of goods x and y.
(2) Graph the following given these two goods and their respective prices: books (units with per
week) at price Ph=1; and food (units per week) at price Pƒ= 2:
(a) Point A (market basket A) that maximizes satisfaction of a consumer.
(b) Point B (market basket B) that is affordable but satisfaction is not maximized.
(c) Point C (market basket C) that gives a higher level of satisfaction but not affordable.
If the utility function for a consumer is defined by U=6X^0.6Y^0.7 . Given that the consumer's income is 300 currency units and unit price of goods X and Y are 12 and 15 currency units respectively, calculate the equilibrium quantity of both goods.
Compute the price elasticity of demand for both goods and interpret your results.
If income and prices of the two goods increase by 50%, calculate the equilibrium quantities of both goods
Chapter 14 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 14.3 - Prob. 1MQCh. 14.3 - Prob. 2MQCh. 14.4 - Prob. 1MQCh. 14.4 - Prob. 1TTACh. 14.4 - Prob. 2TTACh. 14.5 - Prob. 1TTACh. 14.5 - Prob. 2TTACh. 14.5 - Prob. 1MQCh. 14.6 - Prob. 1TTACh. 14.6 - Prob. 2TTA
Ch. 14.6 - Prob. 1MQCh. 14.6 - Prob. 2MQCh. 14.6 - Prob. 1.1TTACh. 14.6 - Prob. 2.1TTACh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 14.1PCh. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Prob. 14.9PCh. 14 - Prob. 14.10P
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