EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Question
Chapter 4, Problem 4.25P
To determine
To plot the budget constraint on a graph for both the plans and to find out the set of baskets that an individual would purchase if Plan A is better than Plan B and vice versa.
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Brenda wants to buy new car and has a budget of $25,000. She has just found a
magazine that assigns each car an index for styling and an index for gas mileage.
Each index runs from 1 to 10, with 10 representing either the most styling or best
gas mileage. While looking at the list of cars, Brenda observes that on average, as
the style index increases by one unit, the price of the car increases by $6,250. She
also observed that as the gas-mileage index rises by one unit, the price of the car
increases by $5,000.
Illustrate the various combinations of style (S) and gas mileage (G) that Brenda
could select with her $25,000 budget.
Using the line drawing tool, illustrate Brenda's budget line. Label this line 'Budget
Line'.
Carefully follow the instructions above, and only draw the required object.
Suppose Brenda's preferences are such that she always receives two times as
much satisfaction from an extra unit of styling as she does from gas mileage. What
type of car will Brenda choose?…
Luke has a monthly income of $80. He spends this money making telephone calls from home (measured in minutes of calls) and on other goods. His mobile phone company offers him two plans:
Plan A: Pay no monthly fee and make calls for $0.50 per minute.
Plan B: Pay a $30 monthly fee and make calls for $0.1 per minute.
Graph Luke’s budget constraint under each of the two plans.
The price of DVDs (D) is $20.00 and the price of CDs (C) is $10.00. Phillip has a budget of $100.00 to spend on the two goods. Suppose that he has already bought 1 DVD and 1 CD. In addition, there are 3 more DVDs and 7 more CDs that he would really like to buy.The price of DVDs (D) is $20.00 and the price of CDs (C) is $10.00. Phillip has a budget of $100.00 to spend on the two goods. Suppose that he has already bought 1 DVD and 1 CD. In addition, there are 3 more DVDs and 7 more CDs that he would really like to buy.
1.) Using the line drawing tool, given the above prices and income, draw his budget line in the figure.Label this line 'L'.
2.) Using the point drawing tool, and considering what Phillip has already purchased and what he still wants to purchase, identify the three different bundles of CDs and DVDs that he could choose. Label these points 'bundle 1', 'bundle 2', and 'bundle 3'. (Assume that he cannot purchase fractional units)
Carefully follow the…
Chapter 4 Solutions
EBK MICROECONOMICS
Ch. 4 - Prob. 1RECh. 4 - Prob. 2RECh. 4 - Prob. 3RECh. 4 - Prob. 4RECh. 4 - Prob. 5RECh. 4 - Prob. 6RECh. 4 - Prob. 7RECh. 4 - Prob. 8RECh. 4 - Prob. 9RECh. 4 - Prob. 10RE
Ch. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Prob. 4.4PCh. 4 - Prob. 4.5PCh. 4 - Prob. 4.6PCh. 4 - Prob. 4.7PCh. 4 - Prob. 4.8PCh. 4 - Prob. 4.9PCh. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29PCh. 4 - Prob. 4.30P
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Similar questions
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