Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 6, Problem 1.4P
(a)
To determine
The budget constraint of the household.
(b)
To determine
Where the household end up his consumption after spilt the income equally for both goods.
(c)
To determine
The budget constraints after the increase in the household income.
(d)
To determine
Identify the goods as normal and inferior.
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Students have asked these similar questions
The graph shows two budget lines and six consumption points (A, B, C, D, E, and F) for Pepsi and Dr Pepper. Note that budget line 1 is before the increase in Fred's income, whereas budget line 2 is after the increase in Fred's income.
Assume that the consumer, Fred, attempts to maximize his utility and exhausts his budget on the two goods.
If Fred's income increases, the movement from point A to point
E
is consistent with Pepsi being a normal good and Dr Pepper being an inferior good.
If Fred's income increases, the movement from point A to point
B
is consistent with Dr Pepper being a normal good and Pepsi being an inferior good.
The budget set, or budget constraint, in the graph shows the
possible combinations of brownies and ice cream cones that
can be purchased. Assume that this person has a total of $18
to spend on brownies and ice cream cones.
How much does a brownie cost?
$
Assume that at point A, the marginal utility from a
brownie is 10 and the marginal utility for an ice cream
cone is 18. This person
is utility maximizing.
should consume more brownies and fewer ice
cream cones.
should consume more ice cream cones and
fewer brownies.
Brownies
18-
16-
14-
12-
10-
8-
6-
4
2.
0
1 2 3
1
A
1
+
4
5
Budget constraint
6
7 8 9 10 11 12 13 14
Ice cream cones
Figure 22-17
The graph shows two budget constraints for a consumer.
Quantity of
Hamburgers
9
Budget
Constraint A
Budget
Constraint B
10
15 Quantity of
Light Bulbs
Refer to Figure 22-17. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then
how much money is he spending on hamburgers?
Chapter 6 Solutions
Principles of Economics (12th Edition)
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Similar questions
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