EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 3, Problem 3RQ
A
To determine
To Plot: a graphical representation of the individual’s indifference curve map.
B
To determine
To explain:individual’s response on fall in the price of streamed TV shows.
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A consumer has a budget set aside for entertainment during the year, and they spend the budget on concerts and plays. The consumer has a strong preference for attending concerts over plays: the two activities are substitutes, but not very strong substitutes. Sketch the indifference curves for this consumer on a graph, with concert tickets on the vertical axis and play tickets on the horizontal axis. Briefly explain why the consumer might ultimately choose to purchase a large number of play tickets, even though they have a strong preference for concerts. Include a budget line on your graph to illustrate this case.
Tom consumes only beer (B) and whisky (W). His utility function is
U(B,W) = 2B + 5W,
where B is the quantity of beer and W is the quantity of whisky. The price of beer is PB = 2, the price of whisky is PW = 5, and Tom’s income is M = 20 dollars.
(a) Obtain the equation of Tom’s indifference curve for the utility U > 0 with beer in the horizontal axis and whisky in the vertical axis. What is the magnitude of the slope of Tom’s indifference curves? Explain the economic meaning of this magnitude. Are Tom’s indifference curves vertically parallel? Explain.
(b) Obtain the equation of Tom’s budget line. What is the magnitude of the slope of the budget line? What is the economic interpretation of this magnitude? Does Tom consume beer at the current prices (indicated above)? Explain in detail.
(c) Are Tom’s preferences quasi-linear? Are they homothetic? Justify each of your answers.
(d) Tom’s brother, Jerry, has a utility function given by
V (B, W ) = max{B, W }.
(d.1) Are Jerry’s…
Tom consumes only beer (B) and whisky (W). His utility function is
U(B,W) = 2B + 5W,
where B is the quantity of beer and W is the quantity of whisky. The price of beer is PB = 2, the price of whisky is PW = 5, and Tom’s income is M = 20 dollars.
(a) Obtain the equation of Tom’s indifference curve for the utility U > 0 with beer in the horizontal axis and whisky in the vertical axis. What is the magnitude of the slope of Tom’s indifference curves? Explain the economic meaning of this magnitude. Are Tom’s indifference curves vertically parallel? Explain.
(b) Obtain the equation of Tom’s budget line. What is the magnitude of the slope of the budget line? What is the economic interpretation of this magnitude? Does Tom consume beer at the current prices (indicated above)? Explain in detail.
(c) Are Tom’s preferences quasi-linear? Are they homothetic? Justify each of your answers.
(d) Tom’s brother, Jerry, has a utility function given by
Chapter 3 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 3.2 - Prob. 1MQCh. 3.2 - Prob. 2MQCh. 3.3 - Prob. 1TTACh. 3.3 - Prob. 2TTACh. 3.3 - Prob. 2MQCh. 3.4 - Prob. 1TTACh. 3.4 - Prob. 2TTACh. 3.5 - Prob. 1MQCh. 3.5 - Prob. 2MQCh. 3.7 - Prob. 1MQ
Ch. 3.7 - Prob. 2MQCh. 3.9 - Prob. 1MQCh. 3.9 - Prob. 2MQCh. 3.10 - Prob. 1TTACh. 3.10 - Prob. 2TTACh. 3.11 - Prob. 1MQCh. 3.11 - Prob. 2MQCh. 3.12 - Prob. 1TTACh. 3.12 - Prob. 2TTACh. 3.12 - Prob. 1MQCh. 3.12 - Prob. 2MQCh. 3.12 - Prob. 1.1TTACh. 3.12 - Prob. 2.1TTACh. 3.14 - Prob. 1MQCh. 3.14 - Prob. 2MQCh. 3.14 - Prob. 1TTACh. 3.14 - Prob. 2TTACh. 3.15 - Prob. 1MQCh. 3.15 - Prob. 2MQCh. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 10RQCh. 3 - Prob. 3.1PCh. 3 - Prob. 3.2PCh. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.7PCh. 3 - Prob. 3.8PCh. 3 - Prob. 3.9PCh. 3 - Prob. 3.10P
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