EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Question
Chapter 4, Problem 4.27P
To determine
To draw:
A graph showing the effect on Person A's budget line and optimal basket when she does not join any club, when she joins the premium club, and when she joins the economy club.
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You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the following table. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X.
Suppose that your family has just decided to adopt a cat named Hailey. You have a monthly budget of $40 that you can choose to spend on either cat
food or other consumption goods. Assume the price of a can of cat food is $5 for the first 2 cans, but then it drops to only $3 per can for each
additional can. All other consumption goods will be treated as a composite good, so you can think of this as simply the cash left over to spend on other
items after buying cat food.
On the following graph, use the green points (triangle symbol) to graph your family's budget constraint.
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
OTHER CONSUMPTION (Amount per month)
50
45
40
35
30
25
20
15
10
5
Budget Constraint
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Each month Larry purchases household utilities. His preferences over gallons of heating oil (x) and units of other utilities (y) can be represented by the utility function: U(x,y) = ln x + ln y. Suppose that the market price of heating oil is $4 per gallon, the price of a unit of other utilities is $1, and that Larry has $320 to spend per month on his utilities. The price of heating oil is too high, so the government proposes a per-unit subsidy of $1.60. Larry can buy heating oil at the price of $2.40 with the per-unit subsidy.
However, the government adjusts the price of heating oil again. The second proposal sets the market price of heating oil to $2.56.
1) What is the equivalent variation of the price change from $2.40 to $2.56?
2) What is the cost to the government?
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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