Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 4, Problem 6AP
To determine
To find the optimum consumption point, the no borrowing and no lending points, substitution effect, and income effect. Also, to ascertain whether both the effects move in the same or opposite direction.
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Students have asked these similar questions
Suppose that
y =100 (income today)
• y' = 150 (income tomorrow)
10% (interest rate on bonds)
%3D
r =
• t = 10 (taxes today)
• t' = 10 (taxes tomorrow)
Suppose that c = 100. Is the consumer borrowing or saving, today? And what will her budget constraint look tomorrow?
The consumer is borrowing.
Her budget constraint tomorrow will be
c' = 150 -10 - 10*(1.1) = 129
The consumer is saving.
Her budget constraint tomorrow will be
c' = 150 -10 + 10*(1.1) = 151
O The consumer is neither borrowing nor saving - she is breaking even.
Her budget constraint tomorrow will be
c' = 150 -10 = 140
O The consumer is saving.
Her budget constraint tomorrow will be
c' = 150 + 10*(1.1) = 161
%D
4. A company introduced a new product to the market in the first month of the year which was supported by the corresponding advertising campaign and showed steady growth in the following months. The initial price was set at a level of 30% above average cost (MK). The company's goal is to cover its overheads and achieve maximization in profits and that's why I'm wondering if the price of €7,5 is optimal. With the continuous growth of sales, the company conducted market research and found that the elasticity of demand towards the price is -3. The formula for calculating the demand elasticity to the price is given: ε T = [-MK/(T-MK)] - 1
Sales (tons) and cost (mm. (EUR) For the next 3 months they are estimated as follows:
JANUARY
FEBRUARY
MARCH
Sales (volume)
2.250
2.500
2.750
Raw materials
€1.400
€1.550
€1.700
Work
€3.350
€4.050
€4.950
Other industrial costs
€3.000
€3.075
€3.150
Administrative expenses
€2.150
€2.150…
Jordan spends all her income on two goods, X and Y.
The prices she paid and the quantities she consumed
last year are as follows: Py = 15, X = 20, Py= 25, and
Y = 30. If the prices next year are Py 6 and Py 30,
%3D
and Jordan's income is 1,020, will she be better or
worse off than she was in the previous year? (Assume
that her tastes do not change.) (LO3)
Chapter 4 Solutions
Macroeconomics
Ch. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Prob. 1NPCh. 4 - Prob. 2NPCh. 4 - Prob. 3NPCh. 4 - Prob. 4NPCh. 4 - Prob. 5NPCh. 4 - Prob. 6NPCh. 4 - Prob. 7NPCh. 4 - Prob. 8NPCh. 4 - Prob. 9NPCh. 4 - Prob. 1APCh. 4 - Prob. 2APCh. 4 - Prob. 3APCh. 4 - Prob. 4APCh. 4 - Prob. 5APCh. 4 - Prob. 6APCh. 4 - Prob. 7APCh. 4 - Prob. 5WWMDCh. 4 - Prob. 6WWMD
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