I have completed question 4 but need help with question 5. Data needed to answer 5 in included in question 4 Kai-Li Tsai, Ph.D.4. Indifference Curve and Budget Line (20%)Annie has an income of $160 an hour. Popcorn costs $5 a bag, and costs $4 a six-pack ofenergy drinka. Draw a graph of Annie’s budget line with six-pack of energy drink on the x-axis, and popcorn on the y-axis. (4%)b. What is the slope of Annie's budget line (2%)? What could this slope be alsocalled? (2%)c. If we know that Annie maximizes her utility with the purchase of 20 bags ofpopcorn, how many six-pack energy drink she will purchase?-(an estimatefrom your graph & actual calculation) (5%), draw an indifference curvereflecting this optimum. (5%)5. Income Effect & Substitution Effect (20%)- (still use budget line with energy drinkon the x-axis, and popcorn on the y-axis).If Annie's hourly income remains $160. The price of energy drink is on sale anddrops to $2 a six-pack of can energy drink, while the price of popcorn remainsat $5 a bag.a. Draw the new budget line(s) (with energy drink on the x-axis, and popcorn onthe y-axis) (5%)b. Use indifference curve to identify the change in quantity purchased (5%)c. and illustrate the income effects (points and distance) (10%) and substitutioneffects (points & distance) (5%)

Income = $160 Price of energy drink = $2 Price of the bag of popcorn= $5 let the number of drinks be…

5. Income Effect & Substitution Effect (20%)- (still use budget line with energy drink on the x-axis, and popcorn on the y-axis). If Annie's hourly income remains $160. The price of energy drink is on sale and drops to $2 a six-pack of can energy drink, while the price of popcorn remains at $5 a bag. a. Draw the new budget line(s) (with energy drink on the x-axis, and popcorn on the y-axis) (5%) b. Use indifference curve to identify the change in quantity purchased (5%) c. and illustrate the income effects (points and distance) (10%) and substitution effects (points & distance) (5%)

5. Income Effect & Substitution Effect (20%)- (still use budget line with energy drink on the x-axis, and popcorn on the y-axis). If Annie's hourly income remains $160. The price of energy drink is on sale and drops to $2 a six-pack of can energy drink, while the price of popcorn remains at $5 a bag. a. Draw the new budget line(s) (with energy drink on the x-axis, and popcorn on the y-axis) (5%) b. Use indifference curve to identify the change in quantity purchased (5%) c. and illustrate the income effects (points and distance) (10%) and substitution effects (points & distance) (5%)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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