EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 2, Problem 2.1P
A
To determine
To Find:The number of apples that the individual decides to buy, if he chooses only apples to buy.
B
To determine
To Find:The number of bananas that the individual decides to buy, if he chooses only bananas to buy.
C
To determine
To Find:The number of bananas that the individual can buy with the leftover amount, if he chooses 10 apples to buy.
D
To determine
To Find:The number of bananas that the individual can buy if he prefers to buy one less apple from the above part C.
E
To determine
To derive:An algebraic equation for the individual’s budget constraint and depict it on the graph considering all the results derived through parts A and D.
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Peter and Cindy each had some money at first. Peter started spending $1.20 daily.
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Suppose Jane has $100$100 and is going to have a birthday party. She wants to order pizza and sushi. The price of a pizza is $6$6, and the price of one package of sushi is $8$8. Considering that she decided to spend $60$60 on pizza, how many pizzas and packages of sushi can Jane order? Enter your answer in the box below and round down to the nearest whole number if necessary; rounding your answer up may cause Jane to exceed her budget.
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QUESTION #1: How many apples and bananas should you buy?
QUESTION #2: When you have found the answer, draw a diagram that shows the outcome.
Step #1. Determine your preferences. Let's suppose that your preferences can be represented
by the following utility function: U(A, B) = AªBB = A0.40 B0.60
FYI: This utility function is known as a Cobb-Douglas utility function. It is the most commonly used function used in
economics! The reason we like it so much is that it has:
1. Constant returns (double your consumption of A and B and your utility doubles); a + B = 1
2. Diminishing marginal utility (the extra utility gained from consuming A (or B) decreases as you consume more of
the A good (or B good); a 0.40); B > a.
Step #2: Determine your…
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