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6. Provide a detailed analysis of the Second Welfare Theorem of Economics

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter2: Choice In A World Of Scarcity

Section: Chapter Questions

Problem 9RQ: Explain why individuals make Choices that are directly on the budget constraint, rather than inside...

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6. Provide a detailed analysis of the Second Welfare Theorem of
Economics

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Given: Assume a consumer is attempting to maximize utility subject to the budget constraint by choosing units of consumption between two goods: good 1 and good 2. Utility maximizing choices are provided in the following table for a baseline scenario and new scenario. Item Baseline New Price of Good 1 $10 $10 Price of Good 2 $10 $6 Income $20,000 $20,000 Units Consumed, Good 1 1000 1250 Units Consumed, Good 2 1000 1250 Utility 4000 5000 Using the table, how did the new event affect good 2? It caused demand for good 2 to decrease. O It caused demand for good 2 to incrcase. OIt caused quantity demanded for good 2 to increase. O It caused no change in quantity demanded for good 2. It cause quantity demanded for good 2 to decrease. It caused no change in demand for good 2.
12. Answer please do;!
Hi could you please answer these questions thank you !
1. Say that there are two goods in the world, books and video games. Say that we observed two of Jim's choices: he chooses bundle A from the budget set bounded by budget line 1, and the bundle B from the budget set bounded by budget line 2. video games B A budget line 2 budget line 1 books a) For each of the two goods, based on the diagram: is the good normal, inferior, or we can't say for sure? Is the good ordinary, Giffen, or we can't say for sure? Explain. b) For which of the two budget lines is the opportunity cost of a book higher and why? What does that statement mean in the context of this model?
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