(1) Draw an Edgeworth box and show the initial allocation of goods, to be labelled e. Indicate the initial quantities of each person's goods on the four axes.
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- Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States. a. Show the effect of the frost on Maya’s budget constraint. b. Show the effect of the frost on Maya’s optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants. c. Show the effect of the frost on Maya’s optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissantsThe diagram below illustrates Olive's optimal combination of calamari C0, and shrimp cocktail, S0, given the budget constraint B0. In addition the diagram illustrates the optimal combination of calamari and shrimp cocktail, C1 and S1, that would exist as a result of an increase in the price of calamari. On this diagram indicate: a. The income and substitution effects. (Also draw the hypothetical budget constraint Bh) b. What type of commodity is calamari?Give typing answer with explanation and conclusion For the following assume that the world has only two goods: apples (y) and bananas (x). Apples cost $5 and bananas $10. Cristiano has $100, what is the equation of his budget constraint?
- John consumes 20 units of food and 24 units of clothing. If food is an inferior good, will John be indifferent between receiving a $24 gift certificate at a clothing store and receiving $24 in cash? Explain and show graphically.Please dont use excel. Calculte to paper.Pareto Efficiency Consider an economy with two people, Nancy and Roger, and two commodities, tea and biscuits. Currently, Nancy and Roger would both be willing to substitute two cups of tea for one biscuit. Further, if the economy were to produce one less cup of tea, the resources released from tea production could be used to produce three more biscuits. a. What is the value of the marginal rate of substitution and the marginal rate of transformation? b. Is the allocation in this economy Pareto efficient? Show graphically by drawing the indifference curve and the production possibilities schedule into the figure below. If not, should there be more tea or more biscuits? c. Explain why an economy in which airlines charge different passengers, different prices for the same flight is not Pareto efficient; when all passengers have the same preferences. d. Consider an economy which produces two goods, cars and shirts. Explain why if a tax is imposed on the consumption of cars but not on…
- The data presented in Table 1 below has the utility function schedule of an individual with an income of $500. The individual’s objective is to maximise utility when consuming two products – Rice and Legumes. Do the following a. Derive the Total Utility schedule for Legumes and the Marginal Utility schedule for Rice. b. Determine the equilibrium consumption of Legumes and Rice before the price change in Legumes c. Determine the equilibrium consumption of Legumes and Rice after the price change in Legumes d. Derive the demand curve for Legumes Units Consumed Legumes ($100) New Price of Legumes ($50.00) Rice ($50.00) TU MU MU/P MU/P* TU MU MU/P 0 0 0 0 1 1200 500 2 1000 900 3 900 1250 4 800 1550 5 600 1800 6 300 2000 7 200 2150Van brings $40 to a baseball game to spend on sodas and pizza. The following diagram shows his budget constraint: SUCES OF PIZZA 20 18 16 14 12 4 2 0 4 6 U BC 10 SODAS According to the diagram, sodas cost 5 12 14 16 18 20 each, and puzza costs $ BC ? per slice. Adjust the diagram to show how Van's budget constraint would change if he had brought more money to the ballpark (Assume the prices of sodasGive 5 examples each of inferior goods and normal goods
- Draw an individual choice diagram for a person choosing between buying apples or bananas with a budget constraint. Be sure to label the curves and optimizing solution set of Qb and Qa. Explain why individuals make choices that are directly on the budget constraint, rather than inside the budget constraint or outside it.Antonio buys five new college textbooks during his first year at school at a cost of $80 each. Used books cost only $50 each. When the bookstore announces that there will be a 50 percent increase in the price of new books and a 50 percent increase in the price of used books, Antonio's father offers him $200 extra. What happens to Antonio's budget line? 1.) Using the line drawing tool, graph Antonio's original budget line. Label this line L₁. 2.) Using the line drawing tool, then graph Antonio's new budget line. Label this line L₂. Carefully follow the instructions above, and only draw the required objects. CIT New Books 12- 11- 10- 9- 8- 7- 6- 5- 4- 3- 2- 1- 0- 0 1 2 3 5 6 8 9 10 11 12 Used Booksa) According to Adam Smith's Model, the prices of goods depend on the relative value of labour used to produce the goods. Therefore, if it takes 7 hours to produce 35 shirts, and 9 heeirs to produce D socks, then I shirt should trade for how many socks? b) Suppose Caitlan has preferences for Watermelons (W) and Bananas (B) given by: Utility V3.85 W B Caitlan wishes to generate X utils from the consumption of watermelons and bananas. Let X A+2C+30. Suppose she can only buy bananas in sets of 5, 10, 15 or 22 units. How many units of watermelons should she consume in each case to ensure that she does not change her desired utility level? c) Suppose that the supply curve for the labour to a firm is given by L=X*w and the marginal expense of labour curve is given by MEL = L/ (X/2) where w is the market wage. Suppose also that the firm's demand for labour (marginal revenue product) curve is given by L-Y-X*MRPL Let X-D and let Y 500 + B. i) If the firm acts as a monopsonist, how many workers…