Clarke County High School has $60,000 to spend on computers and other goods so its budget equation is C + X = 60,000, there C is expenditure on computers and X is expenditure on other things. The high school’s preferences can be represented by the utility function ?(?, ?) = ??2, where the marginal rate of substitution is −?/2?. Currently, the high school’s optimal bundle is $20,000 of computers, and $40,000 of everything else.a. Graphically show the school’s budget line, with computers on the x-axis and all other goods on the y-axis. Label intercepts and the current optimal bundle and sketch an indifference curve.b. The State Education Commission wants to encourage “computer literacy” in schools, and so has proposed the following plan: Give a grant of $20,000 to each school in the state, which the school can use only for computers. If the state adopts the plan, add the school’s new budget constraint to the graph above, making sure to label the line and the appropriate intercepts. What is the school’s optimal bundle (C,X) under this plan? 6. Clarke County High School has $60,000 to spend on computers and other goods soits budget equation is C + X = 60,000, there C is expenditure on computers and X isexpenditure on other things. The high school's preferences can be represented bythe utility function U(C, X) = CX²,where the marginal rate of substitution is-X/2C. Currently, the high school's optimal bundle is $20,000 of computers, and$40,000 of everything else.a. Graphically show the school's budget line, with computers on the x-axis and allother goods on the y-axis. Label intercepts and the current optimal bundle andsketch an indifference curve.b. The State Education Commission wants to encourage "computer literacy" in schools,and so has proposed the following plan: Give a grant of $20,000 to each school in thestate, which the school can use only for computers. If the state adopts the plan, add theschool's new budget constraint to the graph above, making sure to label the line andthe appropriate intercepts. What is the school's optimal bundle (C,X) under thisplan?

a) The budget line equation, C+ X= 60,000 According to this equation, Income = $60,000 Price of…

Answered: Clarke County High School has $60,000…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Clarke County High School has $60,000 to spend on computers and other goods so its budget equation is C + X = 60,000, there C is expenditure on computers and X is expenditure on other things. The high school’s preferences can be represented by the utility function ?(?, ?) = ??2, where the marginal rate of substitution is −?/2?. Currently, the high school’s optimal bundle is $20,000 of computers, and $40,000 of everything else.
a. Graphically show the school’s budget line, with computers on the x-axis and all other goods on the y-axis. Label intercepts and the current optimal bundle and sketch an indifference curve.
b. The State Education Commission wants to encourage “computer literacy” in schools, and so has proposed the following plan: Give a grant of $20,000 to each school in the state, which the school can use only for computers. If the state adopts the plan, add the school’s new budget constraint to the graph above, making sure to label the line and the appropriate intercepts. What is the school’s optimal bundle (C,X) under this plan?

6. Clarke County High School has $60,000 to spend on computers and other goods so
its budget equation is C + X = 60,000, there C is expenditure on computers and X is
expenditure on other things. The high school's preferences can be represented by
the utility function U(C, X) = CX²,where the marginal rate of substitution is
-X/2C. Currently, the high school's optimal bundle is $20,000 of computers, and
$40,000 of everything else.
a. Graphically show the school's budget line, with computers on the x-axis and all
other goods on the y-axis. Label intercepts and the current optimal bundle and
sketch an indifference curve.
b. The State Education Commission wants to encourage "computer literacy" in schools,
and so has proposed the following plan: Give a grant of $20,000 to each school in the
state, which the school can use only for computers. If the state adopts the plan, add the
school's new budget constraint to the graph above, making sure to label the line and
the appropriate intercepts. What is the school's optimal bundle (C,X) under this
plan?

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