1. Consider a consumer whose utility depends on q1 and all other goods. It is known that q1 is an inferior good for this consumer. Graphically illustrate the consumer at the original utility maximizing position. The consumer is offered two options. Option one: the consumer is given q1A amount of good q1 (the consumer does not pay for this amount of q1). Option two: the consumer receives the cash value of the amount of g1A. Would the consumer prefer option one, option two, or be indifferent between them? Explain and add relevant information to the graph (e.g. the graph should illustrate the outcome of each option). Your explanation should be in the context of the necessary conditions. Saying one option is on a higher, lower, or the same indifference curve is not sufficient.

1. Consider a consumer whose utility depends on q1 and all other goods. It is known that q1 is an inferior good for this consumer. Graphically illustrate the consumer at the original utility maximizing position. The consumer is offered two options. Option one: the consumer is given q1A amount of good q1 (the consumer does not pay for this amount of q1). Option two: the consumer receives the cash value of the amount of g1A. Would the consumer prefer option one, option two, or be indifferent between them? Explain and add relevant information to the graph (e.g. the graph should illustrate the outcome of each option). Your explanation should be in the context of the necessary conditions. Saying one option is on a higher, lower, or the same indifference curve is not sufficient.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 6P

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A5
A consumer finds only three products, X, Y, and Z, are for sale. The amount of utility which their consumption will yield is shown in the table below. Assume that the prices of X, Y, and Z are $10, $2, and $8, respectively, and that the consumer has an income of $74 to spend. Product X Product Y Product Z Quantity Utility Marginal Utility per $ Quantity Utility Marginal Utility per $ Quantity Utility Marginal Utility per $ 1 42 NA 1 14 NA 1 32 ___NA__ 2 82 4 2 26 6 2 60 __3.5_ 3 118 3.6 3 36 5 3 84 __3___ 4 148 3 4 44 4 4 100 __2___ 5 170 2.2 5 50 3 5 110 _1.25___ 6 182 1.2 6 54 2 6 116 _0.75__ 7 182 0 7 56.4 1.2 7 120 _0.5_ How many units of X, Y, and Z will the consumer buy when maximizing utility and spending all…
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solve the question given in the image.
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Multiple Choice 1. 8 2. 10 3. 12.50 4. 14 5. 15