Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 9, Problem 30APA
(a)
To determine
The budget line.
(b)
To determine
The substitution effect.
(c)
To determine
The income effect.
(d)
To determine
The affordable point.
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Students have asked these similar questions
The following figure shows the indifference curves and two budget line of student Tuna whose choices are apple and banana.
The Initial price of Banana is €4/kg, when budget line is B1. Initially Tuna was at equilibrium at point A. Answer the following
questions according to the information given on the diagram. Show your calculations below.
a. What is the weekly Income of Tuna? ().
b. If Tuna's initial preference is at A how much Banana she consumes? ("
c. If Price of Banana decreases to €3/kg and she moves to point B, how much Apple she will consume at B? (.
d. If the demand curve for Banana will be derived by using the indifference curves on figure 1, what will be the Price and quantity
coordinates of Point A and Point B on figure 2?
Apples
Price
Bananas
Quantity
Using examples, does an increase in income affect a consumer’s budget line? Does it impact their total utility?.
EXERCISE 3
If 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.
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.
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?
Discuss how Joe’s budget constraint would change if the government subsidised consumption of coffee by £0.50 per cup of coffee.
Chapter 9 Solutions
Macroeconomics
Ch. 9.1 - Prob. 1RQCh. 9.1 - Prob. 2RQCh. 9.1 - Prob. 3RQCh. 9.1 - Prob. 4RQCh. 9.1 - Prob. 5RQCh. 9.2 - Prob. 1RQCh. 9.2 - Prob. 2RQCh. 9.2 - Prob. 3RQCh. 9.2 - Prob. 4RQCh. 9.3 - Prob. 1RQ
Ch. 9.3 - Prob. 2RQCh. 9.3 - Prob. 3RQCh. 9.3 - Prob. 4RQCh. 9.3 - Prob. 5RQCh. 9 - Prob. 1SPACh. 9 - Prob. 2SPACh. 9 - Prob. 3SPACh. 9 - Prob. 4SPACh. 9 - Prob. 5SPACh. 9 - Prob. 6SPACh. 9 - Prob. 7SPACh. 9 - Prob. 8SPACh. 9 - Prob. 9SPACh. 9 - Prob. 10SPACh. 9 - Prob. 11SPACh. 9 - Prob. 12APACh. 9 - Prob. 13APACh. 9 - Prob. 14APACh. 9 - Prob. 15APACh. 9 - Prob. 16APACh. 9 - Prob. 17APACh. 9 - Prob. 18APACh. 9 - Prob. 19APACh. 9 - Prob. 20APACh. 9 - Prob. 21APACh. 9 - Prob. 22APACh. 9 - Prob. 23APACh. 9 - Prob. 24APACh. 9 - Prob. 25APACh. 9 - Prob. 26APACh. 9 - Prob. 27APACh. 9 - Prob. 28APACh. 9 - Prob. 29APACh. 9 - Prob. 30APA
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