7. Study Questions and Problems #7Which of the following most accurately explains the relationship between marginal utility and the law of demand?When the price of a good rises, consumer equilibrium no longer holds because the marginal utility per dollar for the good falls. To restoreequilibrium, the consumer must decrease consumption.*When the price of a good falls, consumer equilibrium no longer holds because the marginal utility per dollar for the good rises. To restoreequilibrium, the consumer must increase consumption.1751ANAR WAUS352206BUCUREMPALATATORAPINKOTOPAREWA 0STATEMENTEVAAlcourteX When the price of a good falls, consumer equilibrium no longer holds because the marginal utility per dollar for the good falls as well. Torestore equilibrium, the consumer must decrease consumption.UNUNUARAWhen the price of a good rises, consumer equilibrium no longer holds because the marginal utility per dollar for the good rises. To restoreequilibrium, the consumer must increase consumption.PRASPRAVER UNPID20-06-20EVALAPS PAREKPāFANARTOPENERATVASTE DOMINGWindfa

The objective of the question is to understand the relationship between marginal utility and the law…

Answered: 7. Study Questions and Problems #7…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy? Multiple Choice 4 apples or 8 bananas о 12 apples or 6 bananas О 6 apples or 12 bananas 5 apples or 10 bananas
Good Y 20 Each week, Mary Selects the quantity of two goods, X and Y that she will consume in order to maximize her utility. She spends her entire weekly income on these two goods. Suppose you are given the following information about a three-week period, the choices that Mary makes over Where Px is the price of good X, Py is the price of good Y, and I is income: Week 1 Week 2 مل ۳۰ رم Week 3 is 7 Hi▬▬▬▬t da. X 10 6 14 Px $1 $1 8 $1 Y GOOD 3 6 9 12 15 17 21 24 21 10 ९1 1) using the line drawing tool, graph Mary's budget line for each week. Label the line L₁, L₂, and 13. + $1 2) Using the point drawing tool, indicate Mary's utility-maximizing bundle for each week. Label these points A, B.C. 30 $2 $2 I 20 20 38
(Table: Optimal Choice of Yogurt and Cheese) Use Table: Optimal Choice of Yogurt and Cheese. The price of yogurt is $2 per unit, and the price of cheese is $4 per pound. Hailey's income is $16. If she spends all of her income on cheese, the most she can buy is pounds of cheese, and her total utility will be Table: Utility from Yogurt and Cheese Number of yogurts 0 1 2345678 O O O 8; 240 4; 22 6; 204 4; 152 Total utility for yogurt 0 32 60 84 104 120 132 140 144 Pounds of cheese 0 1 2 3 4 5 6 7 8 Total utility for cheese 0 44 84 120 152 180 204 224 240
2. Show that if Mr. Green is forced to spend a fixed amount of his income on a particular good, his utility level will be lower than if he could freely allocate his income.
6. Graduate students at University of Massachusetts consume only two goods: rental apartment space (good x) and sandwiches (good y). 2020: I = $3,000 Px = $4 Py = $6 || X 2021: I = $3,300 Px = $5 Py = $6 Assume, in each year, all graduate students have the same income and face the same prices for apartments and sandwiches. However, graduate students have different preferences for apartments and sandwiches, but each student's preferences are consistent from year to year. Assume also that each student chooses his most preferred bundle given his budget set in each year. Denote the bundle in 2020 by (x, Yo) and this year's bundle by (x1» y1). What are the equations for their budget constraints in 2020 and 2021? а. b. What combination (bundle) of apartments and sandwiches is on graduate students' budget constraints in 2020 and 2021? On a carefully labeled graph with square feet on the horizontal axis, draw the с. budget constraints. d. Which students are better off this year, compared to…
5. Your budget is spent on either food or entertainment, both being normal goods. Suppose there is a rise in the price of food. a) In what direction would the substitution effect push the consumption of food? [Hint: The substitution effect measures the effect of what on what? What is the sign of the effect? In which direction has the relative price of food changed? So in what direction will the consumption of food change?] b) In what direction would the income effect push the consumption of food? c) In what direction would the substitution effect push the consumption of entertainment? d) In what direction would the income effect push the consumption of entertainment? e) If you know that consumption of entertainment falls, what would you conclude about the relative magnitudes of the income and substitution effects?
4. The price of cheese rises from $6 to $10 per kilogram, while the price of wine remains $3 per glass. For a consumer with a constant income of $3000, show what happens to consumption of wine and cheese if they are both normal goods. Decompose the change into income and substitution effects
4) Suppose that Jane is willing (at her current consumption bundle) to trade two apples for three oranges and still be at the same level of well-being. Does this mean that Jane likes apples more than oranges? Briefly explain assuming that Jane has normal (well-behaved) preferences.
Please help
2. Muhammad's demand for fresh fish is perfectly income inelastic, and his income increases. If Muhammad's preferences for fish are well-behaved, show the effect of this increase in income on the change in his optimal choice of fresh fish, his expenditure on all other goods, and draw his income-consumption curve. Clearly label your graph.
9. Refer to the following table to ANSWER the following question: The marginal utility of the third soda is Units of Soda Consumed Total Utility (Utils per SodA. 1 35 2 60 3 80 4 90 5 90 6 75 7 50 8 20 Select one: A. 10 utils. B. 20 utils. C. 60 utils. D. 80 utils.
1. Suppose you consume two goods: x and y. Your marginal utility of x is 20 and your marginal utility of y is 24 at your utility-maximizing combination. The current price of x is $5. (a) What is the marginal rate of substitution at your utility-maximizing combination? (b) What is the price of y at your utility-maximizing combination?

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS