A consumer is choosing between magazines and books. His indifferencecurves and budget constraint are shown on the graph to the right.50-45-The utility-maximizing point is Point-B40Suppose that the price of books falls.35....1.) Use the line drawing tool to draw a new budget constraint (still tangent to30-one of the indifference curves). Label this line 'L225-2.) Use the point drawing tool to locate the new utility-maximizing point.Label this point 'T20-Carefully follow the instructions above, and only draw the required objects.15-10-5-22.50-352025Books15404550étv15MacBook Air80DIIescF2F3F5F6F7F8F1!@$146.789QWEITYtabAFつKcaps lockZCVshiftfncontroloptioncommandつMagazinesNリ

A consumer is choosing between magazines and books. Here the utility-maximizing point is Point B.…

Answered: A consumer is choosing between…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 63 and the marginal utility of product Beta is 40. The price of product Alpha is $9, and the price of product Beta is $5. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should Multiple Choice O O O increase consumption of product Beta and increase consumption of product Alpha. make no change in the consumption of Alpha or Beta. increase consumption of product Beta and decrease consumption of product Alpha. increase consumption of product Alpha and decrease consumption of product Beta.
The graph of the budget line below has dollars on the vertical axis and food on the horizontal axis. Which statement is false? D 100 Food The vertical intercept represents all money available for purchasing. The distance OA shows the amount of money spent on OD amount of food. If the amount of money available is known in this graph, then the absolute and relative price of food is known also. The horizontal intercept represents all the food the consumer could purchase with the budget available.
Question 22 A consumer chooses an optimal consumption point where the O marginal rate of substitution is maximized O slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount O ratio of the marginal utilities equals the ratio of the prices O All of the above are correct
5) Consider indifference curves for the consumption of milk and chocolates (you may assume that both are 'goods'). The indifference curves are drawn with the number of chocolate bars on the horizontal axis and pints of milk on the vertical axis. Suppose that at every point, consumer A's indifference curve is flatter than consumer B's. What can you conclude about consumers A and B tastes and preferences?
7) A consumer has to choose the optimal amount of cheese and crackers to purchase. He or she has drawn his or her budget constraint (BC) and indifference curves on a graph with the amount of cheese (in ounces) on the horizontal axis and the amount of crackers (in packages) on the vertical axis. Which of the following statements is true if the price of crackers declines? The BC shifts to the left (down). The BC shifts to the right (up). The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a lower point. The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a higher point.
4 Assume you are always willing to trade two Cardinal tickets for one beer, or one beer fortwo Cardinals tickets, create an indifference map showing this relationship for threelevels of utility. Calculate the MRS for each indifference curve.
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5. Suppose the representative consumer has the (quasilinear) utility function: U(x, y) = ax + In(v) where x,y are consumption goods. Denominated in US dollars, the prices of x and y Pi and pz, respectively. (a) What does the term quasilinear mean? Is consumption of x independent of y? (b) Assume the consumer has a budget of C dollars at his/her disposal. What is the maximum utility the consumer may achieve with this budget? (c) What is the minimum expenditure if the consumer wants to derive U,units of utility?
Reset 9 UTILITY CALCULATIONS TOTAL AND MARGINAL UTILITY Quantity Consumed Marginal Utility Total Utility Total Utility 70 60 50 22 40 22 30 18 20 40 10 14 3 54 2 4. 8. Quantity Consumed 10 Marginal Utility 4 64 20 6. 10 70 1 2 3 4 6. 8. -10 -20 Quantity Consumed Quantity Consumed 2. 3. 6 8. 1. 3.
3. Juliette spends $48 each month on Oreo cookies (which cost $2 per package) and salt and vinegar chips (which cost $3 per bag). a) Suppose that the price of chips falls to $2 per bag and Juliette increases her chip consumption to 8 bags each month. Draw Juliette's new budget constraint and indicate her chosen bundle with an appropriately drawn indifference curve. Label her utility-maximizing bundle with the letter B. (Be sure to determine the right quantities of both chips and Oreos!) -LJ-J-1. IIII IIII J-L--- -1-1-L -LJ-J- 1- --+-+ --1-1 - IIII ת - ד -ר IIII III I IIII IIII L -1-L----1-1-L-- L--L- -LJ-J-1- IIII -LJ-J- 1- IIII IIII -+--- --+-+
4. Suppose your preferences are reflected in the indifference map shown. A burger costs $100 and a slice of pizza sells for $50. You have a food budget of $500 per week. a) How many burgers and slices of pizza will you consume in a typical week? Explain your choice. Demonstrate the effect on your consumption choice if pizza falls in price. b) 18 16 14 12 10 8 6 4 2 Burgers 2 1 3 4 5
12) A consumer’s preferences are given by U(X,Y) = X0.6Y0.4. The price of X is 4, and the price of Y is 5. The consumer has an income of $2000.a) What is the utility maximizing choice of X and Y?b) How would the utility maximizing choice change if price of X falls to 3 because of a pricesubsidy?c) Given the answers to the previous parts plot a linear demand function for X.d) Show that the consumer would prefer the cash equivalent of the price subsidy in part b.

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