a) If ketchup and hotdog are both normal goods, how a consumer’s optimum consumption choice change if this consumer’s income increases? b) If ketchup is a normal good and a hotdog is an inferior good, how the consumer’s optimum consumption choice change if a consumer’s income decreases?

a) If ketchup and hotdog are both normal goods, how a consumer’s optimum consumption choice change if this consumer’s income increases? b) If ketchup is a normal good and a hotdog is an inferior good, how the consumer’s optimum consumption choice change if a consumer’s income decreases?

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 12PA

See similar textbooks

Related questions

Q: 1. Based on the table below describe Marginal Utility and Diminishing Marginal Utility? What happens…

A: The utility is a term that is used to measure satisfaction or happiness in terms of economics. There…

Q: 2. Tom spends all his $100 weekly income on two goods, apples and bananas. His utility function is…

A: Utility maximization problem : With the given prices and the income, a consumer chooses his…

Q: Bridget has a limited income and consumes only wine and cheese; her current consumption choice is…

A: What is Utility? Utility is a term used in economics to describe satisfaction or happiness. When…

Q: Units Consumed Total Utility Marginal Utility 10 10 3 25 4 30 3 6 34

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub- parts for…

Q: . Explain utility and its connection to consumer behavior

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: 5. Reggie consumes only two goods: food and shelter. On a graph with shelter on the horizontal axis…

A: A consumer's desired varied possible pairing of two commodities is represented by the indifference…

Q: The following table shows the total utility gained from the consumption of Fanta Lemon in a week.…

A: The utility is the want satisfying power of the goods and services. Marginal utility is the change…

Q: How does a consumer’s optimal choice of goods change if all prices and the consumer’s income double?

A: If prices and consumer’s income will be double then there is no effect in budget constraint and it…

Q: Mario consumes two goods: cars and motorbikes. An increase in the price of cars while holding income…

A: (A) increase the marginal utility provided by cars. Option "A" is correct. Marginal utility refers…

Q: Suppose you get utility from two goods, food and clothing, and have a certain amount income. Explain…

A: This can be defined as the concept that presents the graphical representation of the quantity of the…

Q: Who determines how much utility an individual will receive from consuming a good?

A: The demand refers to the total amount of a good which an individual is willing, and able to buy at…

Q: Carefully explain how consumers maximize utility of all the products they could possibly purchase.

A: Budget constraint: Px *X+ Py *Y ≤ m Where, Px is price of good X Py is price of good Y m is income

Q: 1..Calculate the optimal quantity of each of two goods (x and y) and the consumers’ total utility…

Q: Given marginal utility per dollar of guavas is greater than marginal utility of apples, how will the…

A: A consumer is a person who buys products that are available in the market. He does it for satisfying…

Question

100%

1. Show the followings:

a) If ketchup and hotdog are both normal goods, how a consumer’s optimum consumption choice change if this consumer’s income increases?

b) If ketchup is a normal good and a hotdog is an inferior good, how the consumer’s optimum consumption choice change if a consumer’s income decreases?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

1. If the consumer can only buy product x, how much will the consumer buy and what will be the total utility? 2.If the consumer buys both product x and product y, how much will the consumer buy of each to maximize utility? 3.When the consumer purchases the utility-maximizing combination of product x and product y, what is the total utility?
1. What is the Total Utility of the second unit? 2. What is the Marginal utility of the third, fourth and the fifth unit? 3. Explain the relationship between Total Utility and Marginal Utility. 4. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? 5. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not. 6. In the last decade or so there has been a dramatic expansion of small retail convenience stores (such as 7 Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores?
4. Given marginal utility per dollar of guavas is greater than marginal utility of apples, how will the consumer reach equilibrium?
1. What information do we gain by isolating the income and substitution effects from each other when examining the effect of a change in price on consumption? How does this further help us understand the characteristics of normal and inferior goods? Using the concepts of the substitution and income effects, how would you define a Giffin good?
The following table shows the total utility gained from the consumption of Fanta Lemon in a week. Quantity 1 2 3 4 5 6 7 Total utility 20 35 45 53 58 58 48 (i) Calculate the marginal utility. What do you observe? (ii) Sketch the total utility and marginal utility curves. (iii) If the price of Fanta Lemon increases from `Rs.8 to `Rs.10, how will it affect its consumption? Explain your answer using the data above.
2. Tom spends all his $100 weekly income on two goods, apples and bananas. His utility function is given by U (A, B) = AB, where A and B stand for the quantity of apples and bananas consumed by Tom. If PA = $4 and PB= $10, how many apples and bananas will he consume? Make sure you write out the utility maximization problem explicitly, including the decision variable(s). What if his utility function is given by U (A, B) = A0.5B 0.5?
How does a consumer’s optimal choice of goods change if all prices and the consumer’s income double?
Q. Bridget has a limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units. a. Is Bridget making the utility-maximizing choice? Why or Why not? b. If not, what should she do instead? Why? Please provide the correct answer. Thank you!
6. Reggie consumes only two goods: food and shelter. On a graph with shelter on the horizontal axis and food on the vertical axis, his price consumption curve for shelter is a vertical line. Draw a pair of budget lines and indifference curves that are consistent with this description of his preferences. What must always be true about Reggie's income and substitution effects as the result of a change in the price of shelter?
1..Calculate the optimal quantity of each of two goods (x and y) and the consumers’ total utility given Px=1, Py=2, I=80, and U(x,y) = x1/2y. How would you represent this graphically? What is value of the utility received by consumer at optimal consumption? Explain all your steps. N.B. You can attach your explanations
1. Based on the table below describe Marginal Utility and Diminishing Marginal Utility? What happens as you consume more and more apples? At what point is utility maximised? Units of Apples Consumed Total Utility (TU) Marginal Utility (MU) 1 10 10 2 18 8 3 24 6 4 28 4 5 30 2 6 30 0 7 28 -2
4. Adam's income declines, and as a result, he buys more calamansi juice. Is calamansi juice an inferior or a normal good? What happens to Adam's deman curve for calamansi juice?