3. In the following graph the consumer begins in equilibrium with an income of $3,600, facingprices of P₁ = $60 and Py = $36.Quantity of Y10075a. In equilibrium,20b. In the new equilibrium,_38 48 60Now let the price of X fall to $30.e. Good X is a(an).units of X are consumed.Quantity of Xc. To isolate the substitution effect, $_consumer.units of X are consumed.d. The total effect of the price decrease isThe income effect isgood.9020must be taken away from theThe substitution effect is

The consumer equilibrium is reached where the indifference curve tangents the budget line. The…

Answered: 3. In the following graph the consumer…

3. In the following graph the consumer begins in equilibrium with an income of $3,600, facing prices of P₁ = $60 and Py = $36. 100

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A consumer has a budget set aside for entertainment during the year, and they spend the budget on concerts and plays. The consumer has a strong preference for attending concerts over plays: the two activities are substitutes, but not very strong substitutes. Sketch the indifference curves for this consumer on a graph, with concert tickets on the vertical axis and play tickets on the horizontal axis. Briefly explain why the consumer might ultimately choose to purchase a large number of play tickets, even though they have a strong preference for concerts. Include a budget line on your graph to illustrate this case.
Hafidh’s income is $200 a month. The price of watch is $25 a show, and the price of a Jeans is $15. Calculate the equation for Hafidh’s budget line Draw a graph of Hafidh’s budget line with the quantity of Watches on the x-axis. If Hafidh’s income increased from $200 to 350$. Explain and show how Hafidh’s budget line changes with watches on the x-axis.
4. John has a utility for the quantity of sandwiches, Xs, and quantity of burgers, Xp, that he consumes, represented by the following equation: U(X,X) = XX His income is Y = $24. The price of a sandwich changes from X, = $1 to X, = $4 while the price of a burger remains at X, = $6. Solve for the compensating variation and equivalent variation associated with this price increase.
5
When Sam has an income of 1.000 , he consumes 30 units of good A and 50 units of good B After Sam's income increases to $1,500 , he consumers 60 units of good A and 40 units of good B. Which of the following statements is correct ? a- Good A is a normal good and good B is an inferior good b- Both goods A and B are inferior goods c- Good A is an inferior good, and good B is a normal good d- Both goods A and B are normal goods
Assume that a consumer can buy only two goods, X and Y, and has an income of $13,000. The price of X is $60 and the price of Y is $140. What is the slope of the budget line if X is measured horizontally and Y is measured vertically? Note that you will need to include a negative sign in your answer. If needed, round your answer to the nearest two decimal places.
2
The following figure shows the indifference curves and two budget line of student Tuna whose choices are apple and banana. The Initial price of Banana is €4/kg, when budget line is B1. Initially Tuna was at equilibrium at point A. Answer the following questions according to the information given on the diagram. Show your calculations below. a. What is the weekly Income of Tuna? (). b. If Tuna's initial preference is at A how much Banana she consumes? (" c. If Price of Banana decreases to €3/kg and she moves to point B, how much Apple she will consume at B? (. d. If the demand curve for Banana will be derived by using the indifference curves on figure 1, what will be the Price and quantity coordinates of Point A and Point B on figure 2? Apples Price Bananas Quantity
Quantity X (unit) Quantity Y (unit) Ux (util) Uy (util) 1 1 15 12 2 2 26 21 3 3 35 27 4 4 41 32 5 5 45 35 48 37 Table 1.1 Assume the price of Good X is RM2 per unit and the price of Good Y is RM1 per unit. With RM13 of income, the household intends to spend all the income on both goods. a. Compute the marginal utility for each quantity in Table 1.1. b. Solve the utility maximizing problem by identifying the number of Good X and Good Y that the household should purchase (based on marginal utility per price).
6.
A consumer is choosing between magazines and books. His set of čonsumer optimums are shown on the graph to the right. 50 Consumer income allocated for these two goods is equal to $150. The price of magazines (P,) is equal to $5.00. 45- 40 How do these changes in the price of books affect the demand for magazines? 35 demand remains constant 30- We can consider books and magazines to be goods. 25- 20- 15- PCC substitute 10- 5- complementary 0- O 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 unrelated Books O étv 21 MacBook Air DII 80 F10 F11 F7 FB F9 F6 F4 F5 F3 F1 F2 * @ # $ 7 8 9 1 2 4 P T Y Q W J K S F く Z C V command oF option command O 回 .. - つエ B ** A.
Steve spends all his income on meals at restaurants and paperback novels. His usual restaurant meal costs $20, and paperback books cost $10. When Steve’s monthly income is $250, he goes out to eat 10 times and purchases 5 books. When his income rises to $280, he goes out to eat 8 times and purchases 12 books. Determine whether the following statements are true or false: Paperback books are normal goods Restaurant meals are necessity goods Paperback books are luxury goods