3. Juliette spends $48 each month on Oreo cookies (which cost $2 per package) and salt and vinegar chips (which cost $3 per bag). a) A major chip producer has experienced a fire, and the disruption of supply has caused the price of chips to increase to $4. As a result, Juliette cuts her consumption of chips to 5 bags per month. Draw Juliett's new budget constraint and indicate her chosen bundle with an appropriately drawn indifference curve. Label her utility-maximizing bundle with the letter C. T LJ-J-L %3D %3D %3D 3D IIII IIII - -1-L -LJ-J-I %3D

3. Juliette spends $48 each month on Oreo cookies (which cost $2 per package) and salt and vinegar chips (which cost $3 per bag). a) A major chip producer has experienced a fire, and the disruption of supply has caused the price of chips to increase to $4. As a result, Juliette cuts her consumption of chips to 5 bags per month. Draw Juliett's new budget constraint and indicate her chosen bundle with an appropriately drawn indifference curve. Label her utility-maximizing bundle with the letter C. T LJ-J-L %3D %3D %3D 3D IIII IIII - -1-L -LJ-J-I %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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ONly parts D-G
5. Jonas purchases only two goods, starfruit (S) and kiwi (K). He has an income of $60 and can buy starfruit at $2 per pound and kiwi at $3 per pound. His utility function is U(S,K)=3S+4K. That is, his (constant) marginal utility for starfruit is 3 and his marginal utility for kiwi is 4. What bundle of starfruit and kiwi should he purchase to maximize his utility? Why?
Lucas has $40 per week that he can spend on lemon soda (X) and chips (Y). The price of the lemon soda (PX) is $2 per bottle, and the price of the chips (PY) is $4 price Write down Lucas’s budget constraint. Draw the budget constraint on the graph below. Make sure to indicate the intercepts and the slope of budget constraint. Label it as BC1. Provide an economic interpretation of the slope of the budget constraint BC1 Suppose Lucas’s income decreases to $12 per week, and the price of lemon soda and chips remain the same. Write down Lucas’s new budget constraint. Then draw his new budget constraint on the same graph above. Make sure to indicate the intercepts and the slope. Label it as BC2. Suppose Lucas’s income remains to be $40 per week and the price of chips remains the same, but the price of lemon soda (PX) increases to $5. Write down Lucas’s new budget constraint. Then draw his new budget constraint on the same graph above. Make sure to indicate the intercepts and the…
Emily is a utility maximizer. Her income is $100, which she can spend on cafeteria meals and on notepads. Each meal costs $5 and each notepad costs $2. At these prices Emily chooses to buy 16 cafeteria meals and 10 notepads. a) Draw a diagram that shows Emily’s choice using an indifference curve and her budget line, placing notepads on the vertical axis and cafeteria meals on the horizontal axis. Label the indifference curve, I1, and the budget line BL1. Make sure you calculate the endpoints of the budget constraint. b) The price of notepads falls to $1; the price of cafeteria meals remains the same. On the same diagram, draw Emily’s budget line with the new prices and label it BL2. c) Lastly, Emily’s income falls to $90. On the same diagram, draw his budget line with this income and the new prices and label it BL3. Is she worse off, better off, or equally as well off with these new prices and lower income than compared to the original prices and higher income?
1) Max chooses to purchase movie tickets and restaurant meals every week with his $100. If the price of a movie ticket is $20 and the price of a restaurant meal is $25, then the slope of his budget constraint will be, a) 1/5 b) -1/5 c) 4/5 d) -4/5 2) Marginal rate of substitution(MRS) is the rate at which consumer is willing to trade one good for another. It must be true that: a) MRS is the slope of an indifference curve in reference to a particular bundle of goods. b) MRS is not the same along an indifference curve that is of usual shape. c) MRS is same along an indifference curve that is of usual shape. d) Both a) and b).
Riley has $6 to spend on ramen and apps for their phone. The price of a bowl of ramen is $2, and the price of an app is $1. Riley's preferences for ramen and apps are represented by the indifference curves on the next page. a. Determine which line (L1, L2, L3, L4, or L5) represents Riley's budget constraint. b. Find the utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of ramen Riley will buy. Suppose now that the price of a bowl of ramen is discounted for students to $1 per bowl. c. Determine which line (L1, L2, L3, L4, or L5) represents Riley's new budget constraint. d. Find the new utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of Ramen Riley will now buy. e. Find the size and direction (positive or negative) of the substitution effect. As part of your answer, state the starting quantity and ending quantity of bowls of ramen that represent this effect. f. Find the size and direction (positive or negative) of…
Question 3: Samantha has $3,000 to spend on two goods: sandwiches and beer. The price of a sandwich is $6 and price of a beer is $5. a) Draw Samantha's budget line. Put beer on the horizontal axis. b) If Samantha's optimal consumption bundle contains 400 sandwiches, how many beer does her optimal consumption bundle contain? Show her optimal consumption in the graph above. c) Draw Samantha's indifference curve crossing her optimal consumption bundle.
3. Juliette spends $48 each month on Oreo cookies (which cost $2 per package) and salt and vinegar chips (which cost $3 per bag). a) Suppose that the price of chips falls to $2 per bag and Juliette increases her chip consumption to 8 bags each month. Draw Juliette's new budget constraint and indicate her chosen bundle with an appropriately drawn indifference curve. Label her utility-maximizing bundle with the letter B. (Be sure to determine the right quantities of both chips and Oreos!) -LJ-J-1. IIII IIII J-L--- -1-1-L -LJ-J- 1- --+-+ --1-1 - IIII ת - ד -ר IIII III I IIII IIII L -1-L----1-1-L-- L--L- -LJ-J-1- IIII -LJ-J- 1- IIII IIII -+--- --+-+
6.
Suppose Sam has a weekly budget of $48 to spend on juice and yogurt. Juice is priced at $4 per gallon, and yogurt is priced at $2 per container. gallons of juice. If he spends his entire $48 on yogurt, he can buy containers of If Sam spends his entire $48 on juice, he can buy yogurt. Use the blue line (circle symbol) to plot Sam's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of juice and yogurt that are affordable for Sam. Finally, place the black point (plus symbol) on the point on Sam's budget constraint that corresponds to a scenario in which Sam spends $24 on each good. Note: Dashed drop lines will automatically extend to both axes. ? 36 33 30 27 24 21 18 12 9 6 3 YOGURT (Containers) 0 0 + 3 6 9 12 15 18 21 JUICE (Gallons) 24 27 30 33 36 BC, ($48) 0 Affordable Region $24 on Each BC₂ ($60)
A consumer has $100 to spend on craft beer and Schweinefleischaft (pork shanks). Suppose craft beercosts $10 per 4-pack if the customer purchases up to five 4-packs. After that, it is $5 per 4-pack. SupposeSchweinefleischaft is $5 per order of pork shanks.(a) Draw the budget constraint for this consumer, with craft beer on the horizontal axis and Schweine-fleischaft on the vertical axis.(b) Will the consumer ever purchase exactly five 4-packs of craft beer? Explain why, using both thegraph in part (a) and words.
34) Suppose that left shoes and right shoes must be purchased separately. Ingrid needs an equal number of each type of shoe and has a budget of $100 for shoes. Left shoes always cost $1. If right shoes cost $19 each, how many of each will Ingrid buy? If the price of right shoes increases to $49 each, how will Ingrid react? Explain your answer by drawing the indifference curves-budget lines. 35) Johnny has $100 to spend on books and all other goods. Books cost $20 each and Johnny is at equilibrium consuming 3 books and $40 worth of other goods. Johnny's grandmom wants to give Johnny either a book or $20 for his birthday. Which gift does Johnny prefer? Explain using an indifference map and budget lines.