Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 23, Problem 4RQ
To determine
Which redistribution of income is correct.
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Consider the following graph, which shows the relationship between an individual's income and the number of times he or she eats out each month.
QUANTITY (Dinners out per month)
20
18
16
14
12
10
8
2
0
0
1
O
2 3
4 5
7
8
INCOME (Thousands of dollars per month)
9 10
0
Felix
Hint: When answering the following, be sure to specify the appropriate units.
The blue point already shown on the graph shows the data for Janet. According to the graph, Janet's income is
Suppose Janet's friend Felix has an income of $8,000 per month and has 16 dinners out per month.
and she has
What happens to the budget line if the government applies a specific tax of $1 per
gallon of gasoline but does not tax other goods (assuming that the consumer will
still buy more than 10 gallons per week)? What happens to the budget line if the
tax applies only to purchases of gasoline in excess of 10 gallons per week?
1.) Use the line drawing tool to draw new budget constraint with the gasoline tax
on all gallons of gasoline. Label this line 'L²₁
2.) Use the multipoint curve drawing tool to draw the new budget constraint when
the gasoline tax applies only to purchase of gasoline in excess of 10 gallons per
week. Label this line 'L³¹. (Note: Be sure to draw the entire budget constraint,
starting at a quantity of 0).
Carefully follow the instructions above, and only draw the required objects.
All other goods, Units per week
10
Gasoline, Gallons per week
L¹
Q
After plotting the final point of your multipoint curve, press the Esc key on your
keyboard to end the line.
What happens to the budget line if the government applies a specific tax of $1 per
gallon of gasoline but does not tax other goods (assuming that the consumer will
still buy more than 10 gallons per week)? What happens to the budget line if the
tax applies only to purchases of gasoline in excess of 10 gallons per week?
1.) Use the line drawing tool to draw a new budget constraint with the gasoline tax
on all gallons of gasoline. Label this line "L2.
2.) Use the multipoint curve drawing tool to draw the new budget constraint when
the gasoline tax applies only to purchase of gasoline in excess of 10 gallons per
week. Label this line L. (Note: Be sure to draw the entire budget constraint,
starting at a quantity of 0).
Carefully follow the instructions above, and only draw the required objects.
10
Gasoline, Gallons per week
After plotting the final point of your multipoint curve, press the Esc key on your
keyboard to end the line.
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- What happens to the budget line if the government applies a specific tax of $1 per gallon of gasoline but does not tax other goods (assuming that the consumer will still buy more than 10 gallons per week)? What happens to the budget line if the tax applies only to purchases of gasoline in excess of 10 gallons per week? 1.) Use the line drawing tool to draw a new budget constraint with the gasoline tax on all gallons of gasoline. Label this line "L2. 2.) Use the multipoint curve drawing tool to draw the new budget constraint when the gasoline tax applies only to purchase of gasoline in excess of 10 gallons per week. Label this line 'L. (Note: Be sure to draw the entire budget constraint, starting at a quantity of 0). Carefully follow the instructions above, and only draw the required objects. 10 Gasoline, Gallons per week After plotting the final point of your multipoint curve, press the Esc key on your keyboard to end the line. étv MacBook Air 80 DII DD esc F1 F2 F3 F4 F6 F7 F8 F9 ! @…arrow_forwardConsider the following graph, which shows the relationship between an individual's income and the number of times he or she eats out each month. S QUANTITY (Dinners out per month) 20 18 16 14 12 10 8 2 0 0 1 O 2 4 5 6 7 8 INCOME (Thousands of dollars per month) 3 9 10 Darnell ? Hint: When answering the following, be sure to specify the appropriate units. The blue point already shown on the graph shows the data for Eleanor. According to the graph, Eleanor's income is has Use the orange point (square symbol) to plot the data for Darnell. Suppose Eleanor's friend Darnell has an income of $2,000 per month and has 4 dinners out per month. and shearrow_forward2. Given: C = 250 + 0.8 Y I= 150 G = 300 TR = 100 (3+3+3+4+3+3+4=23) NX = 100 t =0.25 i) Find the equilibrium level of income. ii) Suppose, because of the current COVID 19 situation C falls to 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)? iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).arrow_forward
- Clothes 7 U, U U2 6. 5 D 4 3 H 2 1 BL BL2 2 4 6 8 10 12 14 Food If you are given a budget line shown as 7BL2 and the price of food is PHP 10 per unit while the price of clothes is PHP 20 per unit, consumer income is PHP 150. If the budget line pivots to 7BL,, the price of food will decrease to PHP 8 per unit. If the price of food decreases, the increase in the consumption of food consumption is due to the income effect that enables consumers less of clothes in exchange for more food and the substitution effect that enables the individual to consume more food and more clothes.arrow_forward10:17 OT 1. A college student enjoys eating pizza. Her willingness to pay for each slice is shown in the following table: Number of pizza slices к 1 2 3 4 5 6 7 Willingness to pay (per slice) $6 + LO 5 4 3 2 1 a. If pizza slices cost $3 each, how many slices will she buy? How much consumer surplus will she enjoy? O 3arrow_forwardLeo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $425 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 90 cents until the benefit equals zero. If Leo earns $275, then he will receive in total benefits from the two programs. Select one: O a. $0. b. $575. c. $602.50. d. $355. cor RC itar orkarrow_forward
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