Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 6.A, Problem 3SQP
(a):
To determine
The indifference curve and also label the points A–D.
(b):
To determine
The budget line of the consumer.
(c):
To determine
The combination that the consumer would consume with an income of $12.
(d):
To determine
The value of the MRS and the slope of the budget line at equilibrium.
(e):
To determine
The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume that the data in the following table are an indifference curve for a consumer:
a. graph this indifference curve and label "Quantity of Y" on the vertical axis and Quantity of X" on the horizontal axis. Label the points A-D.
b. Assume the consumer's budget is $12 and the price of X and Y are $1.00 and $1.50, respectively. Draw the budget line in the above graph.
c. what combination of X and Y will the consumer purchase?
d. What is the value of the MRS and the slope (Px/Py) at consumer equilibrium?
e. Beginning with the graph drawn in part (a), explain and draw graphs to derive demand curve for X
Choice
units y
units of x
A
10
2
B
6
4
C
4
6
D
2
12
Draw YOUR indifference curve for the consumption of two goods (you pick the goods – be creative!) Make sure to include labels.
Why did you choose these two goods? Why do you view these as being a tradeoff?
Carefully explain why the indifference curve has the shape you created. (Hint: Discuss the slope. What it means and how it changes)
Determine a budget that will be allocated towards your consumption of these two goods. Given the budget, prices for the goods, and your preferences, how will you find the utility-maximizing combination? Give an intuitive answer as well as a graphical answer (make sure to label the graph accordingly).
1. Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time
(D). His utility function is:
U = √C.D
a. Sketch Paul's indifference curves for U-5, U-10, and U=20.
b. Suppose Paul has $200 to spend and that a cup of coffee costs $5 and a dozen donuts
costs $20. Draw Paul's budget constraint on the same graph as his indifference curves.
c. Suppose Paul spends all of his income on donuts. How many dozen can he buy and what
is his utility?
d. Show that Paul's income will not permit him to reach the =20 indifference curve.
f.
e. If Paul buys five dozen donuts, how many cups of coffee can he buy? What is his utility?
Use a carefully drawn graph to show that the utility calculated in part e is the highest Paul
can achieve with his $200.
Chapter 6 Solutions
Micro Economics For Today
Ch. 6.1 - Prob. 1YTECh. 6.1 - Prob. 2YTECh. 6.2 - Prob. 1YTECh. 6.A - Prob. 1SQPCh. 6.A - Prob. 2SQPCh. 6.A - Prob. 3SQPCh. 6.A - Prob. 1SQCh. 6.A - Prob. 2SQCh. 6.A - Prob. 3SQCh. 6.A - Prob. 4SQ
Ch. 6.A - Prob. 5SQCh. 6.A - Prob. 6SQCh. 6.A - Prob. 7SQCh. 6.A - Prob. 8SQCh. 6.A - Prob. 9SQCh. 6.A - Prob. 10SQCh. 6.A - Prob. 11SQCh. 6.A - Prob. 12SQCh. 6.A - Prob. 13SQCh. 6.A - Prob. 14SQCh. 6.A - Prob. 15SQCh. 6 - Prob. 1SQPCh. 6 - Prob. 2SQPCh. 6 - Prob. 3SQPCh. 6 - Prob. 4SQPCh. 6 - Prob. 5SQPCh. 6 - Prob. 6SQPCh. 6 - Prob. 7SQPCh. 6 - Prob. 8SQPCh. 6 - Prob. 9SQPCh. 6 - Prob. 10SQPCh. 6 - Prob. 1SQCh. 6 - Prob. 2SQCh. 6 - Prob. 3SQCh. 6 - Prob. 4SQCh. 6 - Prob. 5SQCh. 6 - Prob. 6SQCh. 6 - Prob. 7SQCh. 6 - Prob. 8SQCh. 6 - Prob. 9SQCh. 6 - Prob. 10SQCh. 6 - Prob. 11SQCh. 6 - Prob. 12SQCh. 6 - Prob. 13SQCh. 6 - Prob. 14SQCh. 6 - Prob. 15SQCh. 6 - Prob. 16SQCh. 6 - Prob. 17SQCh. 6 - Prob. 18SQCh. 6 - Prob. 19SQCh. 6 - Prob. 20SQCh. 6 - Prob. 21SQCh. 6 - Prob. 22SQCh. 6 - Prob. 23SQCh. 6 - Prob. 24SQCh. 6 - Prob. 25SQ
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Refer to the information provided in table below. a. If the price of a cinema ticket is 20 TL, the price of a concert ticket is 40 TL and the income is 120 TL, draw the budget line. b. Find marginal utility for each consumption level for both products and show your work in Table. c. Find the utility maximizing level of consumption bundle if the income of the consumer is 120 TL. Show the utility maximizing level of consumption for each product on the table. Explain your answer by stating the utility maximizing rule.arrow_forwardPresent a budget line and a budget set for the consumer of two good X and Y, where the consumer has an income of $3,000 per month. Assume the price of X is 2 and the price of Y is 6. Suppose the price of Y decreases to 4. Show how your budget line changes and use your diagram to explain why the price decrease will make the consumer better off. Add at least two indifference curves, using them to show how the decrease in price will change the optimal choice, assuming the law of demand holds for good Y.arrow_forwardKim has $40 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $10 while each yoga class costs $5. a. Graph Kim’s budget constraint, with movies on the x-axis and yoga on the y-axis. What is the value of the x-intercept? What is the value of the y-intercept? What is the slope of this budget constraint? Suppose the total utility from each of these activities is listed in the table below. What is Kim's utility maximizing point? Movies Total Utility Yoga Classes Total Utility 0 0 0 0 1 40 1 30 2 70 2 55 3 90 3 75 4 95 4 90 5 100 5 100 6 105 6 105 movies and yoga classes How much total utility does she obtain from this combination? c. Suppose the price of movies drops to $5 each. What is her new optimal consumption choice? The new slope of her budget constraint is? Kim will choose to consume how many movies and how many yoga…arrow_forward
- Would you expect marginal utility to rise or fall with additional consumption of a good? Why? b. Raymond consumes meatloaves and pineapples. He has decided that hismonthly budget will be $1500. Suppose that one meatloaf costs $375, while one pineapple costs $150.i. What is the expression for Raymond’s budget constraint? ii. Draw a graph of Raymond’s budget line (meatloaf on the y axis). iii. Show how Raymond’s budget line changes if the price of pineapplesincreases to $370. iv. Suppose Raymond decides to cut his monthly budget in half.Coincidentally, the next time he shops, he learns that meatloaves andpineapples are on sale for half price. Show what happens to Raymond’sbudget line? c. Shannon consumes dresses and lemonade. The price of a dresses is $10 and the price of a lemonade is $30. She is spending all her income on the two goods and her marginal rate of substitution of lemonade for dresses is 2. Is she at an optimum? Explainarrow_forwardThe 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 conesarrow_forward2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current in come is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?arrow_forward
- 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.arrow_forwardSuppose that the average consumer has $300, is only choosing between buying shoes (currently $60) and concert tickets (currently $30). Their indifference curves are given in the graph below. a.) To get the highest utility consistent with their budget, this person will buy ____ pairs of shoes and _____ concert tickets. b.) Instructions: On the graph below, use the "Budget Line" tool to indicate a budget line that corresponds to your answer in part a. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardIf Joe decides to allocate his entire weekly allowance between energy drinks and coffee, he could afford 9 energy drinks and 3 cups of coffee, or 6 cups of coffee and 2 energy drinks. Suppose a cup of coffee costs £2.80. a) Calculate the price of an energy drink and Joe's weekly allowance. Write down Joe's budget equation and draw the corresponding budget line. Mark the two consumption bundles mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. b) Discuss how Joe's budget set would change if his allowance was reduced by £5.20 a week. Show the relevant changes graphically. How should the price of coffee change so that Joe could still afford to buy 6 cups of coffee and 2 energy drinks? c) Discuss how Joe's budget constraint would change if the government subsidised consumption of coffee by £0.50 per cup of coffee.arrow_forward
- Currently, Paula is maximizing utility by purchasing five TV dinners (T) and four LeanCuisine Meals (L) each week. Suppose both T and L cost $5 each.a. Graph Paula’s initial utility-maximizing choice.b. Suppose the price of T falls by $1 and the price of L rises by $1.25. Can Paula stillafford to buy her initial consumption choices? What do you know about her new budgetconstraint?c. Make a new graph to show why Paula will choose to consume more T and less Lgiven her new budget constraint to maximize utility. Is her utility increased, decreased,or unchanged given the price change? [Hint: try to make the graph as big as possible tosee how the utility is tangent/intersects with the lines more easily] d. In part (b), suppose another scenario where the price of T rises by $1 and the priceof L falls by $1.25. Is Paula’s utility increased, decreased, or unchanged given the pricechange?arrow_forwardPage of 3 > Due November 1, 2 Press Esc to exit full screen A. Jack enjoys a cup of cappuccino every morning, which is made with equal parts of steamed milk (m) and espresso(e). Suppose Jack's utility function U(m, e) = min(m, e). Graph Jack's indifference curves when U = 4 and U = 8. B. Leslie buys 2 goods: z and y. His utility function is U(z,y) = 5x+3y. 1. Plot this consumer's indifference curves when U = 15 and U = 20. What is the shape of Leslie's indifference curves? 3. For Leslie, how are these two goods related? C. Leslie's friend Tim has a different utility function for the same goods U(x, y) = √zy. 1. Plot this consumer's indifference curves when U = 15 and Ū = 20. 2. What is the shape of Tim's indifference curves? D. A consumer's utility function for goods 2 and y is U(z,y) = x+2y. 2. 1. Calculate the consumer's marginal utility for each good at (2,2) (Hint: marginal utility represents the amount of utility the consumer gains by consuming one more unit of this good. You can…arrow_forwardKim has $40 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $10 while each yoga class costs $5. Graph Kim’s budget constraint, with movies on the x-axis and yoga on the y-axis. What is the value of the x-intercept? What is the value of the y-intercept? What is the slope of this budget constraint?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Microeconomics (MindTap Course List)EconomicsISBN:9781305971493Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning