Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 5, Problem 11P
To determine
Explain the statement with the help A’s income consumption curve.
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Megan likes to eat toast with hazelnut spread and drink wine. She enjoys these items in very specific proportions: For every piece of toast with
hazelnut spread she eats, she drinks exactly one glass of wine, and vice versa.
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In this scenario, toast with hazelnut spread and glasses of wine are
Two possible bundles of toast with hazelnut spread and glasses of wine are shown on the following graph, labeled A and B.
Using three purple points (diamond symbol), plot Megan's indifference curve that passes through point A (11). Then, using three orange points
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Hint: To plot both indifference curves, place one point on…
Justin Barlow, a careful maximizer of utility, consumes only two goods, Krispy
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Farah has $100 to spend each month on bread and chicken. Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound.
Draw her budget constraint and label it BC0. Put bread on the horizontal axis and chicken on the vertical axis. Be sure to identify the intercept values.
Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken. On the same graph you drew in part (a), draw an indifference curve to identify her optimal bundle. Label this bundle "E."
Is her budget exhausted? Verify your answer.
Now suppose Farah's income falls so that she can now devote only $80 to the two goods. Prices however remain unchanged. In the same diagram, graph her new budget constraint and label it BC1. Be sure to identify any new intercept values.
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Chapter 5 Solutions
Microeconomics
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6P
Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 1CPCh. 5 - Prob. 2CPCh. 5 - Prob. 3CPCh. 5 - Prob. 4CPCh. 5 - Prob. 5CPCh. 5 - Prob. 6CPCh. 5 - Prob. 7CPCh. 5 - Prob. 8CP
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