Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked. All Other Goods A D Food O The blue budget line shows before getting food stamps. The red budget line shows after getting food stamps. The green budget line shows after getting food stamps. O At poing B, the person is using all his food stamps and none of his cash to buy food. O At point A, the person is using all of his food stamps and none of his cash to buy food. B.

Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked. All Other Goods A D Food O The blue budget line shows before getting food stamps. The red budget line shows after getting food stamps. The green budget line shows after getting food stamps. O At poing B, the person is using all his food stamps and none of his cash to buy food. O At point A, the person is using all of his food stamps and none of his cash to buy food. B.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked.
Consider food stamps where the government gives a person $200 worth of food stamps that provide a 50% discount on food bought. With $200 of these food stamps, the person can used the food stamps to buy $200 of food for $100 cash. After his food stamps are exhausted, the person can continue to buy food but must pay full price in cash. All Other Goods A Food O The blue budget line shows before getting food stamps. The green budget line is after getting food stamps. O The red budget line is after getting food stamps. O Moving from D to B, the person is using food stamps to buy food. O From C to A, the person is using food stamps to buy food. O At point A, all the food stamps are used. O At point A, the person is consuming 100 units of food and spending the rest of his money on other goods.
E1 Suppose the Federal Government issues $100 worth of food stamps to everyone in your city. These stamps are coupons that can be exchanged for $100 worth of food at the grocery store and they can be used only by the person to whom they are issued. Draw your budgetline between “food’ and “all other goods” both before and after the food stamps are issued. Assume the price of food = price of “all other goods” = $1.00 and the individual’s initial income is $200.
Suppose Jane has $100$⁢100 and is going to have a birthday party. She wants to order pizza and sushi. The price of a pizza is $6$⁢6, and the price of one package of sushi is $8$⁢8. Considering that she decided to spend $60$⁢60 on pizza, how many pizzas and packages of sushi can Jane order? Enter your answer in the box below and round down to the nearest whole number if necessary; rounding your answer up may cause Jane to exceed her budget.
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.
On the diagram to the right is plotted a single bundle of 2 books and 3 DVDs consumed per month. This bundle is a point on the consumer's budget constraint. If the price of one book is $135.00 and one DVD is $90.00, then the consumer's level of monthly income is $540 (round your answer to the neareast dollar). Use the line drawing tool to draw the consumer's budget constraint. Label this line 'Budget'. Carefully follow the instructions above, and only draw the required object.
Mr. Chang can buy two goods- cake and juice. If he spends his entire income on cake, he can buy 30 cakes and if he spends his entire income on juice, he can buy 60 liters of juice. If the price of cake is $6/cake: What is the price of 1 liter of juice? Draw a neatly labeled diagram showing Mr. Chang’s possible consumer equilibrium clearly. If his income changes to $240, what would happen to Mr. Chang’s consumer equilibrium? Is he better off or worse off? Why? Indicate using a diagram.
A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per bottle. Under what circumstance(s) if any can an increase in the price of pillows induce a consumer to buy more of that good? Explain. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.
Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $.75 and the price of peanuts is $1.50. Suppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Why would this budget line be preferable to the old one?
Suppose that, from an initial individual consumer equilibrium position in the indifference curve-budget line diagram, the prices of both goods rise by 10 percent. What happens to the position and slope of the budget line? Why does the consumer’s level of satisfaction from a given money income fall? Illustrate and explain. Would it be acceptable for an economist to say that the level of satisfaction of the consumer fell by exactly 10 percent? Why or why not?
Peter and Cindy each had some money at first. Peter started spending $1.20 daily. After 15 days, Cindy started spending 1 2/3 of what Peter spent daily. When CIndy spent all of her money, she had spent $11.60 more than Peter. a) How many days did Cindy take to spend all of her money? b) How much did Peter spend in total when Cindy spent all of her money?
Simone likes peanut butter and jelly (PB&J) sandwiches. When Simone makes a PB&J sandwich she always uses 4 tablespoons of peanut butter and 2 tablespoons of jelly. Suppose that the price of peanut butter is $0.05 per tablespoon and that the price of jelly is $0.15 per tablespoon. Simone lives above a bakery and receives free day old bread from her baker friend. The amount of Simone's income spent on PB&J sandwiches is $8 a week. Which of the following statements is true? A. Simone's indifference curves for peanut butter and jelly are normal indifference curves. B. Simone's indifference curves for peanut butter and jelly are straight lines, since she always eats peanut butter and jelly in a particular combination. C. Simone's indifference curves for peanut butter and jelly each have a right angle, since peanut butter and jelly are perfect complements for Simone. D. Simone maximizes her utility from PB&J sandwiches by consuming 8 sandwiches a we O E. Answers (C) and (D) are both true.