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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- Use this information to answer the following 4 questions: Marie has a weekly budget of $24,which she likes to spend on magazines and pies.24. If the price of a magazine is $4 each, what is the maximum number of magazines she couldbuy in a week?25. If the price of a pie is $12, what is the maximum number of pies she could buy in a week?26. Draw Marie’s budget constraint with pies on the horizontal axis and magazines on thevertical axis. What is the slope of the budget constraint?27. What is Marie’s opportunity cost of purchasing a pie? I need help with number 26 and 27.arrow_forwardGraphically draw and explain the income effect curve: 1.Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie’s income is m. (b)Suppose m = $60. Write down Annie’s budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully. (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve.arrow_forward1. An individual's budget Suppose Sean has a weekly budget of $48 to spend on oat milk and peanut butter. Oat milk is priced at $4 per quart, and peanut butter is priced at $2 per jar. If Sean spends his entire $48 on oat milk, he can buy jars of peanut butter. Use the blue line (circle symbol) to plot Sean's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of oat milk and peanut butter that are affordable for Sean. Finally, place the black point (plus symbol) on the point on Sean's budget constraint that corresponds to a scenario in which Sean spends $24 on each good. Note: Dashed drop lines will automatically extend to both axes. PEANUT BUTTER (Jars) 38 33 30 27 24 21 18 15 12 8 3 0 ++ 0 + 36 9 12 15 18 21 24 OAT MILK (Quarts) 12 quarts of oat milk. If he spends his entire $48 on peanut butter, he can buy 24 27 30 33 36 BC, ($48) O Affordable Region + $24 on Each BC₂ ($60) ?arrow_forward
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