8. Normal and inferior goodsLarry likes going to the ballpark to watch baseball, and he also is fond of going to the theater to listen to the symphony orchestra. The followingdiagram shows two of Larry's indifference curves for going to ballgames and symphonies. With Larry's initial budget constraint (BC), he chose to goto two symphonies and six baseball games per month (point X). Then his budget constraint shifted to BC2, and he chose to go to five symphoniesand five ballgames per month (point Y).2BALLGAMESZ0510SYMPHONICSof the following choices, which could have shifted Larry's budget constraint from BC₁ to BC₂? Check all that apply.His income increased while the prices of baseball and symphony tickets stayed the same.The price of symphony tickets increased while his income and the price of baseball tickets stayed the same.The prices of both baseball and symphony tickets decreased while his income stayed the same.His income decreased while the prices of baseball and symphony tickets stayed the same.Based on Larry's consumption of ballgames and symphonies after his budget constraint shifted, ballgames are normalare inferiorgoods.goods and symphonies

Answer:1. The correct answers are: His income increased while the prices of baseball and symphony…

Answered: 8. Normal and inferior goods Larry…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Sam likes Pepsi (P) twice as much as he likes Coke (C). Assume the price of Pepsi is $3 and the price of Coke is $1 and that Sam's income is $150. What is Sam's budget constraint? Draw Sam's budget constraint and two feasible bundles of Pepsi and Coke (Pepsi on the horizontal axis) and attach the drawing to your answer.
8. Normal and inferior goods Antonio likes going to the ballpark to watch baseball, and he also is fond of going to the theater to listen to the symphony orchestra. The following diagram shows two of Antonio's indifference curves for going to ballgames and symphonies. With Antonio's initial budget constraint (BC1), he chose to go to four symphonies and six baseball games per month (point X). Then his budget constraint shifted to BC2, and he chose to go to five symphonies and three ballgames per month (point Y). BALLGAMES 3 8 10 0 4 5 SYMPHONIES BC 8 BC 10 ? Of the following choices, which could have shifted Antonio's budget constraint from BC₁ to BC2? Check all that apply. His income increased while the prices of baseball and symphony tickets stayed the same. The prices of both baseball and symphony tickets increased while his income stayed the same. His income decreased while the prices of baseball and symphony tickets stayed the same. normal The price of symphony tickets increased…
Chapter 22 Homework Poornima likes going to the ballpark to watch baseball, and she also is fond of going to the theater to listen to the symphony orchestra. The following diagram shows two of Poornima's indifference curves for going to ballgames and symphonies. With Poornima's initial budget constraint (BC B₁), she chose to go to two symphonies and six baseball games per month (point x). Then her budget constraint shifted to BC, and she chose to go to five symphonies and five ballgames per month (point Y). SYMPHONIES Of the following choices, which could have shifted to Poornima's budget constraint from BC₁ BC₂ ? Check all that apply. The prices 2 both baseball and symphony tickets decreased while her income stayed the same. Her income decreased while the prices of baseball and symphony tickets stayed the same. The price of symphony tickets increased while her income and the price of baseball tickets stayed the same. Her income increased while the prices of baseball and symphony…
Jesse has a budget of $16 to spend on either ice cream or cookies at the movie theater. A scoop of ice cream costs $4 while cookies costs $2. Use the table below to identify the utility maximizing quantity of ice cream and cookies given Jesse’s budget constraint. HINT: Use utility maximizing formula, MU1/P1 = MU2/P2 Ice cream (Quantity) Total Utility Cookies (Quantity) Total Utility 1 8 1 20 2 12 2 35 3 24 3 56 4 30 4 60 5 32 5 62 6 35 6 68 Group of answer choices 2 ice cream and 4 cookies 1 ice cream and 5 cookies 3 ice cream and 6 cookies
Draw YOUR indifference curve for the consumption of two goods (you pick the goods – be creative!) Make sure to include labels. Why did you choose these two goods? Why do you view these as being a tradeoff? Carefully explain why the indifference curve has the shape you created. (Hint: Discuss the slope. What it means and how it changes) Determine a budget that will be allocated towards your consumption of these two goods. Given the budget, prices for the goods, and your preferences, how will you find the utility-maximizing combination? Give an intuitive answer as well as a graphical answer (make sure to label the graph accordingly).
Alex has a monthly budget of $72 to spend on commuter train trips and organic pasta. Each train trip costs $12; each box of pasta costs $6. Alex's preferences for train travel and pasta are represented by the indifference map on the following page. a. Determine which line (L1, L2, L*, or L**) represents Alex's budget constraint. b. Find their utility-maximizing bundle (E1, E2, e*, or e**). How many train trips will Alex take? Suppose the state government establishes a program to subsidize public transportation for commuters, such that each train trip now costs Alex $6. c. Determine which line (L1, L2, L*, or L**) represents Alex's new budget constraint. d. Find their new utility-maximizing bundle (E1, E2, e*, or e**). Determine how many train trips Alex will now take. e. Find the size and direction (positive or negative) of the substitution effect for train trips. As part of your answer, state the starting quantity and ending quantity of train trips that represent this effect. f. Find…
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Pam has a monthly budget of £120 to be spent on T-shirts and trainers. She could afford to buy two T-shirts and two pairs of trainers. She could also buy eight T-shirts. In each case, she would be spending her entire monthly allowance. Calculate the price of a T-shirt and the price of a pair of trainers. Write down Pam’s budget equation and draw the corresponding budget line. Mark the two consumption bundles mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. Discuss how Pam’s budget set would change if the price of a T-shirt doubles. Show the relevant changes graphically. How should Pam’s income change so that she could still afford to buy two T-shirts and two pairs of trainers? Discuss how Pam’s budget constraint would change if the government imposed a tax of £3 per each pair of trainers.
ONly parts D-G
7. MRS and utility maximization Suppose your classmate Felix loves to eat dessert-so much so that he allocates his entire weekly budget to apple crisp and pie. The price of one bowl of apple crisp is $1.75, and the price of a piece of coconut crème pie is $7.00. At his current level of consumption, Felix's marginal rate of substitution (MRS) of apple crisp for pie is 5. In other words, Felix is willing to sacrifice five bowls of apple crisp for one piece of pie per week. Does Felix's current consumption bundle maximize his utility? That is, does it make him as well off as possible? If not, how should he change it to maximize his utility? Felix could increase his utility by buying more apple crisp and less pie per week. Felix could increase his utility by buying less apple crisp and more pie per week. Felix's current bundle maximizes his utility, and he should keep it unchanged.
Gabriella obtains utility from consuming granola bars and cappuccino. The following table shows the total utility (TU) she obtains from consuming different amounts of the two goods. The price of a granola bar is $3 and the price of a cup of cappuccino is $2. She has allocated $9 to spend on granola bars and cappuccino. 1. Complete the table by calculating the marginal utility (MU) and the MU per dollar spent on each granola bar and cup of cappuccino. 2. What is Gabriella’s optimal consumption bundle of granola bars and cups of cappuccino?
A consumer has a budget set aside for entertainment during the year, and they spend the budget on concerts and plays. The consumer has a strong preference for attending concerts over plays: the two activities are substitutes, but not very strong substitutes. Sketch the indifference curves for this consumer on a graph, with concert tickets on the vertical axis and play tickets on the horizontal axis. Briefly explain why the consumer might ultimately choose to purchase a large number of play tickets, even though they have a strong preference for concerts. Include a budget line on your graph to illustrate this case.

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