Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 7, Problem 5RQ
To determine
Income effect.
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Suppose that with a budget of $100, Deborah spends $60 on sushi and $40 on bagels when sushi costs $2 per piece and bagels cost $2 per bagel. But then, after the price of bagels falls to $1 per bagel, she spends $50 on sushi and $50 on bagels. How many pieces of sushi and how many bagels did Deborah consume before the price change? At the new prices, how much money would it have cost Deborah to buy those same quantities (the ones that she consumed before the price change)? Given that it used to take Deborah’s entire $100 to buy those quantities, how big is the income effect caused by the reduction in the price of bagels?
32/
Assume that a consumer has a given budget or income of $24 and that she can
buy only two goods, apples or bananas. The price of an apple is $3.00 and the
price of a banana is $2.00. What is the slope of the budget line if the quantity of
apples were measured on the horizontal axis and bananas on the vertical axis?
Cathy has $240 to spend on cherry and/or coconuts. Suppose you have drawn her budget line for
cherry and coconuts with cherry on the horizontal axis and coconuts on the vertical axis.
If the price of coconuts increases by 20% and Cathy's income increases by 20%, but the price of
cherry remains the same, then
O the budget line shifts outward in a parallel fashion
O the budget line shifts inward in a parallel fashion
O the budget line becomes steeper
O the budget line becomes flatter
O none of the above
Chapter 7 Solutions
Microeconomics
Ch. 7.1 - Prob. 1QQCh. 7.1 - Prob. 2QQCh. 7.1 - Prob. 3QQCh. 7.1 - Prob. 4QQCh. 7.A - Prob. 1ADQCh. 7.A - Prob. 2ADQCh. 7.A - Prob. 3ADQCh. 7.A - Prob. 1ARQCh. 7.A - Prob. 2ARQCh. 7.A - Prob. 1AP
Ch. 7.A - Prob. 2APCh. 7.A - Prob. 3APCh. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7P
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- Suppose that price of good X rises by 25 % while price of Y rises by 50% and Income rises by 50%. Then which of the following is correct? O Budget line becomes flatter and consumer is able to afford new bundles that were not affordable before. Budget line becomes steeper and consumer is not able to afford some bundles that were affordable before. Budget line becomes flatter and consumer is not able to afford some bundles that were affordable before. Budget line becomes steeper and consumer is able to afford new bundles that were not affordable before.arrow_forwardAnya is currently consuming $1000 worth of consumption goods C and spending 30 hours in leisure I per week, where her marginal rate of substitution is 20. Assume that the price of a consumption good C is $1. This implies that she is willing to: O a. sacrifice 20 hours of leisure to get an extra $1 worth of consumption. O b. sacrifice $20 worth of consumption to enjoy the next hour of leisure. O c. her current utility will be higher by $20 if she gets one more unit of leisure. O d. she values the next unit of consumption at $20.arrow_forward12. Wayne has $2,000 dollars to spend on Grey Cup football tickets (measured in numbers along the horizontal axis) and on other goods (measured in dollars on the vertical axis). His preferences and budget line are represented in the figure below. Wayne's optimal choice is to buy 4 tickets, but the maximum he can buy from the box office is just two tickets. What is the box office price for a ticket? $ willing to pay a scalper for two more tickets? $ What is the maximum price Wayne is other goods (S) 2,000 1,600 1,200 800 400 4. 6 8 10 2. Number of Grey Cup Ticketsarrow_forward
- You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the table below. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (price–quantity-demanded table) for X.arrow_forwardSuppose John spends all income on video games and pizza. Suppose the price of video game decreases and John's income increases. Which of the following must be true? O The amount of pizza that John can purchase decreases. O The amount of video games that John can purchase decreases. The amount of video games that John can purchase decreases and the amount of pizza that John can purchase increases. O The amounts of video games and pizza that John can purchase increase.arrow_forwardConnie has a monthly income of $20.00 that she allocates among two goods: meat (M) and potatoes (P) O 8- Suppose meat costs $10.00 per pound and potatoes $2.00 per pound. Connie's budget line (L) is drawn in the figure to the right 7- 6- Suppose also that her utility function is given by the equation U(M,P) 2M P. What combination of meat and potatoes should she buy to maximize her utility? 5 To maximize utility, Connie should buy pounds of meat and pounds of potatoes. (Enter your responses rounded to two decimal places.) An outbreak of potato rot raises the price of potatoes to $4.00 per pound. What combination of meat and potatoes maximizes Connie's utility now? L. U3 pounds of meat and Connie now maximizes utility by consuming pounds of 1 U, potatoes. (Enter your responses rounded to two decimal places.) 2 3 10 11 12 13 14 15 16 Potatoes When using the multipoint curve drawing tool, hit thearrow_forwardYou are choosing between two goods, X and Y, and your marginal utility from each is as shown in the following table. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X.arrow_forward6 Rebecca consumes both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup. Which of the following marginal utility pairs is consistent with Rebecca's consumer equilibrium at these prices? a. MU of iced tea = 1; MU of coffee - 1 b. MU of iced tea -1; MU of coffee-2 c. MU of iced tea -2; MU of coffee = 3 d. MU of iced tea = 3; MU of coffee = 4 e. MU of iced tea = 4; MU of coffee = 5arrow_forward23. Suppose that there are two goods in an economy and that all prices double. At the sametime, the consumer’s income triples, then:(a) The budget line becomes steeper(b) The budget line becomes flatter(c) The budget line does not change(d) The slope of the budget line does not change, but it makes a parallel shift in towardsthe origin(e) The slope of the budget line does not change, but it makes a parallel shift out fromthe originarrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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