3. (10 points)605040Quantity of Y302020B10=11IIIAZM01020304050607080Quantity of XSuppose that a consumer has the indifference map shown above. The relevant budget line isLZ. The price of good Y is $10.(a) What is the consumer's income? Please show your calculations.(b) What is the price of good X? Please show your calculations.(c) Write the equation for the budget line LZ.(d)) What point in the graph will lead to utility maximizing with the budget line LZ and theindifference curves as shown above? Please label this point as “C” and give anexplanation.(e) Please explain why the consumer will not choose point A or point B.

⏹️ Approach to solving the question: (a) Determine the Consumer's Income 1. Identify the Price and…

Answered: 3. (10 points) 60 50 40 Quantity of Y…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please show your answer step by step with reasons. (i) A consumer has income of £3,000. Apple juice is priced at £3 a bottle and cheese is priced at £6 a kilo. Draw the budget constraint for a consumer with standard preferences. What is the slope of this budget constraint?(ii) Show a consumer’s budget constraint and indifference curves for apple juice and cheese. Show the optimal consumption choice. If the price of juice is £3 a bottle and the price of cheese is £6 a kilo, what is the marginal rate of substitution at this optimum? (iii) The price of cheese rises from £6 to £10 a kilo, while the price of juice remains at £3 a bottle. For a consumer with a constant income of £3,000, show what happens to consumption of juice and cheese. Decompose the change into income and substitution effects.
5. The elasticity of substitution will be a lower number: (a) The less curved is the indifference curve (b) The more curved is the indifference curve (c) The greater the income elasticity of demand of the good on the horizontal axis (d) The greater the degree of substitutability between the two goods (e) If tastes are both homothetic and quasilinear
) Suppose there are two goods, X and Y. The price of good X is $5, the price of good Y is $3, and your income is $60. Neatly graph your budget line and label the intercepts. (a) What is the slope of your budget line? (b) How many units of good Y do you give up per unit of good X? (c) Suppose the price of good X rises to $6, show what happens to the budget line and label any new intercepts. (d) What is the new slope of the budget line? How many units of good Y do you now give up per unit of good X? (e) Suppose the price of good X only rises to $6 once you have purchased six units of good X. In other words, it is $5 per unit for the first six units and $6 per unit thereafter. Make a new graph of this "kinked" budget constraint.
f 1 Appendix - showing an indifference curve. Quantity of Y C B Quantity of X The slope of the budget line facing the consumer is a. -Px/Py O b. -X/Y O c. -Py/Px d. -Y/X e. none of the above
PROBLEM (1) Suppose a consumer has just enough money to afford the bundle of 3 apples and 2 oranges, and similarly she also has just enough money to afford the bundle of 2 apples and 4 oranges. (a) Denoting the number of apples with x and oranges with y, plot the two given bundles on a graph, and calculate the relative price of apples; px/ py. (b) If she buys only apples with her budget, how many can she buy? If she buys only oranges, how many can she buy? Write down the budget equation for the consumer. (Notice that knowing two points on the budget line, you can write down the budget equation, even though you weren't given the prices nor the income explicitly!) (c) Suppose MUx = 20 and MUY = 30 at some point on the budget line. Is she maximizing utility by choosing this bundle? If not, should she buy fewer apples (and more oranges), or more apples (and fewer oranges), to increase her utility? (d) Forget about (c); instead, you learn that her utility function is u(x,y) = Axy³. What is…
10) Figure 1 shows some indifference curves and budget lines for consumer Yusuf. Milk A B Cheese Figure 1 If Yusuf's income increases, his optimal consumption changes from point A to point B. Which of the following statements is true for Yusuf? (a) Cheese and milk are substitutes. (b) Cheese is an inferior good. (c) Milk is an inferior good . (d) Milk is a normal good. (e) None of the above.
rosses Suppose a consumers budget set car be written as $200 = $5x + $10y (a) Draw the graph with an indifference curve showing that the consumer is in equilibrium and identify where the budget set cross both.x and Y axis. (b) Now, if there is an increase in the price of good.x, and both x and y are normal goods, graphically show the effect of the increases in P and identify what part of it is due to the substitute effect, and what part is due to the income affect. X
Consumer's surplus is the highest in the case of- (A) Necessities (B) Comforts (C) Luxuries (D) Conventional necessities 1 to IA (C to 35 oubong
c and d please
QUESTION 7 Assume the following is the budget equation for Courtney who spends her income between music concerts and movies: 86 Music Concerts + 85 Movies = 7216 If Music Concerts are measured on the vertical axis, what would be the slope of the budget line ? 2
3. A consumer's indirect utility function is given by V (p, y) = f(p)y. (a) What is the form of this consumer's expenditure function? (b) What kind of preferences does this consumer have?
(D)

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