Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 21, Problem 2PA
Subpart (a):
To determine
The complement goods and substitute goods.
Subpart (b):
To determine
The complement goods and substitute goods.
Subpart (c):
To determine
The complement goods and substitute goods.
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Students have asked these similar questions
Q.4. Compare the following two pairs of goods:
• Coke and Pepsi
• Racket and Shuttle
a) In which case are the two goods complements? In which case are they substitutes?
b) In which case do you expect the indifference curves to be straight? In which case do you
expect the indifference curves to be very bowed?
c) In which case will the consumer respond more to a change in the relative price of the two
goods?
a. What is Mika’s initial basket when the price of a Good X is $10? b. How much utility does this basket generate for Mika?c. What is Mika’s final consumption basket when the price of Good X increases to $15?d. Compute the values for the decomposition basket, B. e. Determine the numerical values of the substitution and income effects and graph your results.f. Is Good X normal or inferior goods for Mika? How do you know?
instructions: answer question d,e and f only
Consider two different pairs of goods:
a. Sunscreen and bug spray
b. Hot dogs and hamburgers
Which pair of goods are most likely complements? Which pair of goods are most likely substitutes?
Which pair of goods most likely have fairly straight indifference curves? Which pair of goods most likely have very bowed indifference curves? Why?
In which case will a consumer respond more to a change in the relative price of the two goods?
Chapter 21 Solutions
Principles of Microeconomics (MindTap Course List)
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1CQQCh. 21 - Prob. 2CQQCh. 21 - Prob. 3CQQCh. 21 - Prob. 4CQQCh. 21 - Prob. 5CQQCh. 21 - Prob. 6CQQ
Ch. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QRCh. 21 - Prob. 7QRCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PA
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- a. What is Mika’s initial basket when the price of a Good X is $10? b. How much utility does this basket generate for Mika?c. What is Mika’s final consumption basket when the price of Good X increases to $15?d. Compute the values for the decomposition basket, B. e. Determine the numerical values of the substitution and income effects and graph your results.f. Is Good X normal or inferior goods for Mika? How do you know?arrow_forwardCompare the following two pairs of goods and answer the following questions about complements, substitutes and the income and substitution effects: (1) Coke and Pepsi(2) Shoes and socks Which pair of goods most likely have fairly straight indifference curves? Which pair of goods most likely have very bowed indifference curves? Why?arrow_forwardThe following figure shows the indifference curves and two budget line of student Tuna whose choices are apple and banana. The Initial price of Banana is €4/kg, when budget line is B1. Initially Tuna was at equilibrium at point A. Answer the following questions according to the information given on the diagram. Show your calculations below. a. What is the weekly Income of Tuna? (). b. If Tuna's initial preference is at A how much Banana she consumes? (" c. If Price of Banana decreases to €3/kg and she moves to point B, how much Apple she will consume at B? (. d. If the demand curve for Banana will be derived by using the indifference curves on figure 1, what will be the Price and quantity coordinates of Point A and Point B on figure 2? Apples Price Bananas Quantityarrow_forward
- 1. Good X is a Giffen good (a good that violates the law of demand). Suppose that the price of Good X increases. Explain the interaction between the substitution effect and incoming effect of this price increase in a diagram with three budget lines and two indifference curves.arrow_forwardSuppose Cenk consumes only two goods, Good X (inferior good) and Good Y (normal good). Given that these goods are imperfect substitutes of each other and he chooses the bundle, which maximizes his satisfaction, answer the following questions. a. For Cenk, draw a hypothetical equilibrium using his budget constraint and indifference curves and show his optimal bundle. (Place Good X on the horizontal and Good Y on the vertical axis.) b. Say, the price of Good X decreases. Show the Income and Substitution effects of this price change on Cenk's optimalarrow_forwardJerry spends his entire budget on bread and gasoline. His preferences are complete, transitive, monotonic, and convex. For Jerry, bread is an inferior good that follows the law of demand. Moreover, his cross-price elasticity of demand for gasoline with respect to the price of bread is negative. Suppose the price of bread increases, all else constant. a. Create a chart to show the total, income, and substitution effects on bread and gasoline of the increase in the price of bread. b. Use budget lines and indifference curves to graphically illustrate the three effects. Be sure to label each effect on your graph (or through the chart from part a) and plot bread on the x-axis and gasoline on the y-axisarrow_forward
- Compare the following two pairs of goods:• Coke and Pepsi• Skis and ski bindingsa. In which case are the two goods complements? Inwhich case are they substitutes?b. In which case do you expect the indifferencecurves to be fairly straight? In which case do youexpect the indifference curves to be very bowed?c. In which case will the consumer respond more to achange in the relative price of the two goods?arrow_forwardCan Giffin goods also be normal goods?arrow_forwardRaphael consumes only cheese and crackers. True or False: Cheese and crackers can both be inferior goods for Raphael. True or False Suppose that cheese is a normal good for Raphael while crackers are an inferior good. If the price of cheese falls, Raphael's consumption of crackers (decrese or increase) ? and his consumption of cheese ( decrese or increase) ? .arrow_forward
- Would you expect marginal utility torise or fall with additional consumption of a good? Why?arrow_forwarda) Jim buys gingerbread and candy, both of which are normal goods. When the price of gingerbread rises, the income effect induces Jim to buy _______ gingerbread and ________ candy. b) Jim buys candy and gingerbread, both of which are normal goods. When the price of gingerbread rises, the substitution effect induces Jim to buy_______gingerbread and________ candy.arrow_forward1. a) Explain the nature of an indifference curve map, making reference to the graph below. QUANTITY (APPLES) 11 12 13 B QUANTITY (ORANGES) b) Show on the graph how a consumer could reach an equilibrium at point A with a given budget constraint. c) Show on the graph how this equilibrium would change if the price of oranges decreased. d) Identify on the graph the income and substitution effects of the price change, and explain the nature of these effects.arrow_forward
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