C. Given the following indifference curves, the budget and the prices of goods X and Y, at what point is the optimal choice? Explain your answer. d. Suppose that the budget doubles or increases to PHP 1,000, and all other factors remain constant, what happen to the budget line? How about the new optimal choice? Explain your answer.

C. Given the following indifference curves, the budget and the prices of goods X and Y, at what point is the optimal choice? Explain your answer. d. Suppose that the budget doubles or increases to PHP 1,000, and all other factors remain constant, what happen to the budget line? How about the new optimal choice? Explain your answer.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 3SQP

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3. Nathaniel must divide PHP 500 between the consumption of product X and product Y. The relevant market prices are Px=50 and P-20. a. Write the equation for the consumer's budget line. Interpret the equation. b. Illustrate the consumer's opportunity set in a carefully labeled diagram, where X lies on the x-axis while Y lies on the y-axis. Interpret the consumer's opportunity set. c. Given the following indifference curves, the budget and the prices of goods X and Y, at what point is the optimal choice? Explain your answer.
Refer to the indifference curve/budget line diagram below in Figure 7. Given that a consumer initially faces budget line (BL1) and ICI, and thus, by choosing consumption point c, is able to achieve the optimal utility level. If the price of x (Px) decreases, then the substitution effect (SE) is the movement from _-. effect (IE) is the movement from and the income y a IC2 d IC: BLI Figure 7 O a. from b to a; and a to d. O b. from a to b; and b to c. O c. No correct answwers. O d. from c to d; and d to a.
The graph of the budget line below has dollars on the vertical axis and food on the horizontal axis. Which statement is false? D 100 Food The vertical intercept represents all money available for purchasing. The distance OA shows the amount of money spent on OD amount of food. If the amount of money available is known in this graph, then the absolute and relative price of food is known also. The horizontal intercept represents all the food the consumer could purchase with the budget available.
A consumer is choosing between magazines and books. His indifference curves and budget constraint are shown on the graph to the right. 50- 45- The utility-maximizing point is Point-B 40 Suppose that the price of books falls. 35 .... 1.) Use the line drawing tool to draw a new budget constraint (still tangent to 30- one of the indifference curves). Label this line 'L2 25- 2.) Use the point drawing tool to locate the new utility-maximizing point. Label this point 'T 20- Carefully follow the instructions above, and only draw the required objects. 15- 10- 5- 22.5 0- 35 20 25 Books 15 40 45 50 étv 15 MacBook Air 80 DII esc F2 F3 F5 F6 F7 F8 F1 ! @ $ 1 4 6. 7 8 9 Q W E IT Y tab A F つ K caps lock Z C V shift fn control option command つ Magazines N リ

Question 7: For each of the following price-income scenarios, sketch the con- sumer's budget lines on one set of axes (i.e. put all three budget lines in one picture and label them 1, 2, and 3). Y is income, and pı and p2 are the prices of goods 1 and 2, respectively. (1) Y = 70, p1 = 5, p2 = 10 (2) Y = 70, p1 = 10, p2 = 10 (3) Y = 140, p1 = 10, p2 = 10 For the prices and income in part (1), solve for the optimal bundle for a con- sumer with each of the following utility functions: (i) U(q1, 42) = min{q1,5q2}; (ii) U (q1, 42) = 391 + 4q2; and (iii) U(41, 42) = q" 42 3/7 4/7 4 In each case, how would the optimal amounts of each good change if the prices and income were to change to those given in part (2)?
1 . Assume the budget constraint and the indifference curves are both linear. Assume the consumer is willing to tradeoff 1 of good X for 1 of good Y. If the relative price of one additional good X is giving up 1/2 of good Y, then the optimal bundle of the two goods is? Assume the budget constraint and the indifference curves are both linear. Assume the consumer is willing to tradeoff 1 of good X for 1 of good Y. If the relative price of one additional good X is giving up 1/2 of good Y, then the optimal bundle of the two goods is? Assume the government imposes an effective minimum wage (i.e., one above the equilibrium wage rate that would otherwise prevail in that market). Our supply and demand analysis implies? If preferences for pizza increase and the price of labor to produce pizza decreases, the equilibrium quantity of pizza will ____ and the equilibrium price of pizza will _____ .? Assume an intertemporal budget constraint that shows how consumption can be traded off between…
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4. Suppose a person has $8 to spend only on apples and bananas. Apples 1 cost $0:4 each, and bananas cost $0:1 each. Furthermore, his preferences for apples (A) and bananas (B) can be represented by U = pAB. a) If A = 5 and B = 80, what will utility be?b) If A = 10, what value of for B will provide the same utility in part a? c) If A = 20, what value of for B will provide the same utility in parts a and b?d) Graph the indi§erence curve implied by parts a through c.e) Give the budget constraint, which of the points identiÖed in parts a through c can be bought by this person?f) show through some examples that every other way of allocating income provides less utility than does the point identiÖed in part b. graph this utility maximizing situation.
please only do: if you can teach explain each partc: what does it mean? can you show graphs: For these to be optimal choices with such preferences, the indifference curve through a must lie entirely on or above the budget line associated with (p, w), and simi- larly for r' for the budget line associated with (p', w'). how do you know this:Because each of these bundles lies below the other budget line, this implies that the indifference curves must cross, which is impossible. can you show graphs: note that (3,1) is a conver combination of x and x', so for conver preferences must be weakly preferred to x (the less preferred bundle between a and a'). But then the bundle (3,5/3) must be strictly preferred z, contradicting that is optimal given the initial budget set
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3. Returning to problem 3 on Homework 2 in which Emma is endowed with (i.e., starts off with) 160 gallons of milk and 100 apples, suppose at the original prices pm = $2 and pa= $1 she chooses to consume 120 gallons of milk and 180 apples. 0 Draw her budget set and equilibrium consumption bundle (including the maximal indifference curve). b. Show that if pm were to increase, she would end up better-off. Explain why. a. 4. Consider a consumer whose utility function is u(x, y)=√xy (MRS(x, y) =) X a. Assume the consumer has income $120 and initially faces the prices px= $1 and py=$1. How much x and y would they buy? Draw the budget constraint and the demands. b. Next, suppose the price of x were to increase to $4. How much would they buy now? Draw this in the same figure. c. Decompose the total effect of the price change on demand for x into the substitution effect and the income effect. That is, determine precisely how much of the change is due to each of the component effects. (Hint: See…