EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 10SP
To determine
Substitution and income effects.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Think back to a purchase that you made recently and respond to the following:
How would you describe your thinking before you made that purchase?
Did you have any budget constraints?
If so, what were they?
Would you have made the purchase if the price had increased?
Why or why not?
Marie has a weekly budget of $24. Pie's are $12. Magazine's are $4. What is the maximum number of pies Marie can buy in a week? What is the maximum number of magazines Marie can buy in a week?
Optimal consumption refers to
Multiple Choice
the mix of products that maximizes total utility for the limited amount of income consumers have to spend.
the total number of products that maximizes total utility for consumers.
the maximum total utility a consumer receives by the consumption of one more item.
the amount demanded that will create the strongest economy.
Chapter 16 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
Knowledge Booster
Similar questions
- You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your opportunity cost of seeing a movie this afternoon? Select one: O a. $57 O b. $12 ○ c. $22 ○ d. $8arrow_forwardMarie has a weekly budget of $24, which she likes to spend on magazines and pies. If the price of a magazine is $4 each, what is the maximum number of magazines she could buy in a week?arrow_forwardMika earns $379 per week which she spends entirely at the grocery store, purchasing either food or alcohol. The price of food is $1/unit, while the price of alcohol is $4/unit. Mika receives an additional $50/week in food stamps that can only be only be used to buy food at the grocery store (so, this money could be used to buy food but NOT alcohol). Mika knows someone who will give her cash in exchange these food stamps at a rate of $0.50 in cash for every $1 in food. stamps. Cash, of course, can be used to buy either food or alcohol. What is the vertical coordinate of the vertical intercept of Mika's budget constraint if she were to graph quantity of food on the horizontal axis and quantity of alcohol on the vertical axis? (Note: The answer may not be a whole number, so round to the nearest hundredth)arrow_forward
- You have £20 per week to spend, and two possible uses for this money: telephoning friends back home, and drinking coffee. Each hour of phoning costs £2, and each cup of coffee costs £1. Your utility function is U(X,Y) = XY, where X is the hours of phoning you do, and Y the number of cups of coffee you drink. What are your optimal choices? What is the resulting utility level? You can use the standard result on the constrained maximization of such a function, but must state it clearly. Now suppose the price of telephone calls drops to £1 per hour. What are your optimal choices? What is the resulting utility level? How much income per week will enable you to achieve the same quantities at the new prices as the ones you chose before? What income will enable you to attain the same utility as you did before? Comment on your answer in the context of equivalent variation and compensating variation.arrow_forwardAhmed is considering his plans for the coming weekend. He is currently working as a marketing specialist in a big advertising company. He normally spends the weekend with family but this weekend he is thinking of going on a camping trip that would cost him about $1,900. At the same time, his manager asked him whether he can help during the weekend and the company will be willing to pay him an overtime bonus of $1,000. If Ahmed goes on the camping trip, he can manage to provide a number of quick consultancy services that would earn him around $2,500. If Ahmed decided to go on the camping trip what would be the incremental cost of that decision ($)? a. None of the given answerS O b. 1,000 O c. 2,500 O d. 1,900 O e. 600arrow_forwardJane receives utility from days spent traveling on vacation domestically (D) and days spent traveling on vacation in a foreign country (F), as given by the utility function U(D,F) = 10DF. In addition, the price of a day spent traveling domestically is $100, the price of a day spent traveling in a foreign country is $400, and Jane’s annual travel budget is $4000. Suppose F is on the horizontal axis and D is on the vertical axis. Jane's marginal rate of substitution between F and D is equal to 10 1 F/D D/Farrow_forward
- Bryce is at the local grocery store, shopping for himself and his girlfriend Renee. This week, chicken breasts are on sale for 45 percent off the regular price. What two effects does Bryce face that may cause him to purchase more chicken breasts this week than he did last weekarrow_forwardExplain how changes in income (budget constraint) and prices affect consumer consumption choices. Think back to a purchase that you made recently. How did you evaluate whether or not you would be purchasing the item?arrow_forwardAnderson is facing the hardest decision in his life: Should he buy the newest Xbox Series X (cost $500), the newest Apple Airpod Max (cost $550), or the newest Apple Mac Pro Wheels Kit (cost $700). Right now, Anderson has exactly $700. Provided that Anderson already has EVERYTHING he needs and the $700 cannot be used on anything else to make him happier (in other words, the $700 should only be spent on these 3 items. Moreover, for example, if Anderson chooses to buy the Xbox for $500, the remaining $200 is not usable and has no value to Anderson). 1/ If Anderson chooses to buy the Airpod Max, what is the opportunity cost associated with that option? 2/ How would your answer in 1/ change if Anderson just won the $1 million lotteries today? 3/ How would your answer in 1/ change if Anderson just lost one of his $100 bill today, making him now only has $600 left?arrow_forward
- Amanda consumes three different products: apple (x), orange (y) and banana (z). Her utility function is U=xy^2z^3. The prices of the products: px=20, py=30, pz=40. Her income that she spends for fruits is 3,000. How many apple (x), orange (y), and banana (z) does she buy in case of optimal consumption?arrow_forwardKatie’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 80) x (L – 40) This utility function implies that Katie’s marginal utility of leisure is C – 80 and her marginal utility of consumption is L – 40. There are 110 hours in the week available to split between work and leisure. Katie earns $15 per hour after taxes. She also receives $200 worth of assistance benefits each week regardless of how much she works. Graph Katie’s budget line. What is Katie’s marginal rate of substitution when L = 70 and she is on her budget line? What is Katie’s reservation wage? Find Katie’s optimal amount of consumption and leisure.arrow_forwardAlex, who was convinced that "Football is coming home", was very excited for the World Cup last year. Unfortunately, he realized that his favourite Paul Gascoigne jersey from Euro 1996 was getting old, so he wanted to buy a new one before England's first game the following week. He could either buy a 2014 James Milner shirt from retailer A, which would make him totally happy (utility=1), or a 2006 David Beckham shirt from retailer B, which gives him a utility of 0.8. However, the shirts are not available today. There is a 50% chance that retailer A will have the shirt on the week-end, and 70% chance that retailer B will have theirs on the week-end. Due to time and work constraints, Alex can only visit one of these retailers before the tournament starts, otherwise he will have to keep his old 1996 shirt, which gives him a utility of 0.5. He can also ask his friend Nathan to check both places in the morning. But being a Welsh supporter, Nathan will not do it for free and wants some…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning