7. Assume that Mei has $100 per month to divide between dinners at a Chinese restaurant and evenings at Zanzibar, a local pub. Assume that going to Zanzibar costs $20 and eating at the Chinese restaurant costs $10. Suppose Mei spends two evenings at Zanzibar and eats six times at the Chinese restaurant. a. Draw Mei's budget constraint and show that she can afford six dinners and two evenings at Zanzibar. b. Assume that Mei comes into some money and can now spend $200 per month. Draw her new budget constraint. c. As a result of the increase in income, Mei decides to spend eight evenings at Zanzibar and eat at the Chinese restaurant four times. What kind of a good is Chinese food? What kind of a good is a night at Zanzibar? d. What part of the increase in Zanzibar trips is due to the income effect, and what part is due to the substitution effect? Explain your answer.

7. Assume that Mei has $100 per month to divide between dinners at a Chinese restaurant and evenings at Zanzibar, a local pub. Assume that going to Zanzibar costs $20 and eating at the Chinese restaurant costs $10. Suppose Mei spends two evenings at Zanzibar and eats six times at the Chinese restaurant. a. Draw Mei's budget constraint and show that she can afford six dinners and two evenings at Zanzibar. b. Assume that Mei comes into some money and can now spend $200 per month. Draw her new budget constraint. c. As a result of the increase in income, Mei decides to spend eight evenings at Zanzibar and eat at the Chinese restaurant four times. What kind of a good is Chinese food? What kind of a good is a night at Zanzibar? d. What part of the increase in Zanzibar trips is due to the income effect, and what part is due to the substitution effect? Explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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