2. A consumer is in equilibrium at point A in the accompanying figure. The price of good X is $5. (LO2, L03) a. What is the price of good Y? b. What is the consumer's income? c. At point A, how many units of good X does the consumer purchase? d. Suppose the budget line changes so that the consumer achieves a new equilibrium at point B. What change in the economic environment led to this new equilibrium? Is the consumer better off or worse off as a result of the price change? Product Y

2. A consumer is in equilibrium at point A in the accompanying figure. The price of good X is $5. (LO2, L03) a. What is the price of good Y? b. What is the consumer's income? c. At point A, how many units of good X does the consumer purchase? d. Suppose the budget line changes so that the consumer achieves a new equilibrium at point B. What change in the economic environment led to this new equilibrium? Is the consumer better off or worse off as a result of the price change? Product Y

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

ECON302 TPS2: Demand Suppose that Graham enjoys painting green people. He has very particular preferences and must have exactly 3 gallons of yellow paint for each 2 gallons of blue paint. Let Y be the number of gallons of yellow paint and B be the number of gallons of blue paint. Also, let PÅ be the price of blue paint. Suppose Graham has $20 to spend on paint. Also, the price of yellow paint is Py = $1 per gallon. a) Graph Graham's price consumption curve for the prices PB = $1, and PB = 2, PB = $4. Please put the number of gallons of B on the vertical axis and the number of gallons of Y on the horizontal axis. Be sure to label your graph carefully and accurately.
On the graph below, the consumer begins at L1. The relative prices change to L2. Complete the table and the sentence below. (Hint: The dashed line is a reference line to show us the income effect. Point B shows only the income effect. The change from A to B is the income effect. The change from B to C is the substitution effect.) Porcupines consumed at ‘A’ Grenades consumed at ‘A’ Porcupines consumed at ‘C’ Grenades consumed at ‘C’ Will consumption of Grenades increase or decrease due to the income effect? Quantity change in Grenades due to income effect Will consumption of Grenades increase or decrease due to the substitution effect? Quantity change in Grenades due to substitution effect Will consumption of Porcupines increase or decrease due to the income effect? Quantity change in Porcupines due to income effect Will consumption of Porcupines increase or decrease due to the substitution effect?…
Assume the following expression summarizes an individual's demand for good #1: qª (P1, P2, Y) = 10 – pi + 2p2 – Y Currently, the individual's available income is $10 (y = 10), the price of good #1 is $8 (p1 = 8), and the price of good #2 is $5 (p2 = 5). Which one of the changes below would cause the largest increase in the individual's consumption of good #1? O The price of good #1 falls by 1% The price of good #1 increases by 1% The price of good #2 falls by 1% O The individual's income falls by 1%
Suppose Victoria has a budget of $66 that she spends on movies (Q1) and roller skating (Q₂). The price of movie tickets recently increased from $8 per person to $11 per person, and the price of roller skating decreased from $7 to $6 per person. What is Victoria's new budget constraint? Provide your answer below: FEEDBACK $=$×Q₁ + $x Q₂
Consider a person who consumes two goods, x and y, and has a utility function given by U(x, y) = In(x)+y. This person has an income of $100 and faces a price of $0.50 for good x and $1 for good y. Price of x then rises to $0.60. Solve for the compensating variation (CV) and equivalent variation (EV) of this price change. Show your work.
Please do it step by step. Thanks for the answer.
Laura's preferences over commodities X₁ and x₂ can be represented by U(x₁,x2)=min{3x₁, x₂}. She maximizes her utility subject to her budget constraint. Suppose there is an increase in p1. There are both income and substitution effects of this price change. There is an income effect but not a substitution effect of this price change. There is a substitution effect but not an income effect of this price change. It is unclear whether the consumer will buy more or less x1 as a result of the increase in p1.
Suppose a consumer has income of 1000, and buys pizza and coke. The price of pizza is 100 and price of coke is 50. Draw a budget line that represents the set of bundles this individual can afford if they use all their income. (Put movies on the X axis). Label the places where the budget line intercepts each axis and the slope of the line. Suppose that in consumer equilibrium this individual consumes 7 pizza and 6 coke. What rules must hold in consumer equilibrium? Label this bundle in your drawing (call it point “A”). Draw an indifference curve associated with this bundle, and explain how its slope at the equilibrium point relates to the slope of the budget line. Consider the bundle 2 pizza and 8 coke. Label this point. What can you say about the slope of the indifference curve that passes through the point? (For example, is it bigger than, equal to, or smaller than -1?) Now suppose that income goes up to 15oo. Illustrate how the budget constraint will change. If both goods are…
Refer to figure 6.1. Assume that L1 represents the budget line before a price change. Point C represents the: A) uncompensated effect on an increase in the price of soup B) compensated effect on a decrease in the price of soup C) uncompensated effect on a decrease in the price of soup D) compensated effect on an increase in the price of soup
John has $300 as income and he uses his income only for apples and bananas. If he uses his income only for apples, he can buy 10 pounds. If he uses his income only for bananas, he can buy 15 pounds. Which one is the correct formula for his budget constraint when X=pounds of apples, Y=pounds of bananas and the prices are per pound? a) More information is needed to answer the question. b) 15X + 10Y = 300 c) 10X + 15Y = 300 d) 20X + 30Y = 300 e) 30X + 20Y = 300
Rakhi likes to consume only two commodities X and Y, and nothing else. Both the commodities give her positive utilities, thereby giving rise to her preferences being well- behaved and convex. However, she treats commodity X as an inferior good. Suppose Rakhi earns an income of 1000 per month and the ongoing prices of commodities X and Y are 20 and 10, respectively. (a) Show, with the help of a diagram, what will happen to her optimal consumption of commodity X, in each of the following circumstances: Situation A: Price of X falls to 10, while everything else remains the same. Situation B: Her income increases to 2000, while prices remain the same. (b) What can you say about the demand curve for commodity X that Rakhi’s choice behaviour would produce? Elaborate, with the help of diagram.
Consider the consumer's problem with two goods, good X and good Y. Is it possible that the budget line of the consumer, given by the equation pyX + PyY = I shifts to the right and parallel to its original position in (X, Y) plane while the income () remains constant? Provide an analytical explanation for your response. (Hint: the budget line shifts to the right and parallel to its original position when the income I rises and prices constant. This question asks if the prices can change in a certain way that the budget line shifis as if income had increased.)