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 andpints of milk on the vertical axis. Suppose consumer A has a flatter indifference curve than consumer B. Inthis case, we can conclude that:a.Consumer A likes chocolate more than consumer B.b.The price of milk relative to the price of chocolates is higher for consumer Athan for consumer B.с.The indifference curves of the two consumers cannot cross.d.Given the same amount of chocolates, consumer A is willing to swap one barof chocolate for a smaller amount of milk than consumer B.

Answer - Option - d Given the same amount of chocolates, consumer A is willing to swap one bar of…

Answered: Consider indifference curves for the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Emily is a utility maximizer. Her income is $100, which she can spend on cafeteria meals and on notepads. Each meal costs $5 and each notepad costs $2. At these prices Emily chooses to buy 16 cafeteria meals and 10 notepads. a) Draw a diagram that shows Emily’s choice using an indifference curve and her budget line, placing notepads on the vertical axis and cafeteria meals on the horizontal axis. Label the indifference curve, I1, and the budget line BL1. Make sure you calculate the endpoints of the budget constraint. b) The price of notepads falls to $1; the price of cafeteria meals remains the same. On the same diagram, draw Emily’s budget line with the new prices and label it BL2. c) Lastly, Emily’s income falls to $90. On the same diagram, draw his budget line with this income and the new prices and label it BL3. Is she worse off, better off, or equally as well off with these new prices and lower income than compared to the original prices and higher income?
10. Assume an individual's preferences are represented by the following indifference map and he has an income of S400. Which of the following is shown when the price of Good I is $20 and the price of Good 2 increases from $10 to S16? Note: Even though the price of Good 2 is increasing, the steps to determine the income and substitution effects are the same. 50 45 40 35 30 25 20 15 10 10 15 20 25 30 35 40 45 50 Good 1 Good 2 is a normal good. Good 2 is an inferior good, but not a Giffen good. Good 2 does not satisfy the Law of Demand. • Ignoring the Income Effect, the Substitution Effect will cause the individual to consume more of Good I. A. B. 21 C. 3 None of the above statements are true. D. Good 2
Tessa likes both ice-creams and pies. However, if she eats too much of them, she gets sick. That is, cating ice-creams or pics beyond a certain amount lowers Tessa's utility. Draw a set of indifference curve which might represent Tessa's preferences for ice-creams and pies.
2 Indifference curves Suppose an individual who derives utility u(x, y) from consuming a units of good X and y units of good Y. Derive the indifference curve for a level of utility U for each of the following utility functions. Draw them in the graph below for a utility level U = 18. (A) u(x, y) = 2x + 3y (B) u(x, y) = min{3x, y} (C) u(x, y) = xy
John has a utility function for chocolates (x) and candy (y) which is represented by u(x,y)=xy. Suppose that his income is 1000 TL and the prices of the goods are Px=10 TL and Py =5 TL. Now suppose that the price of chocolate decreases to Px=8 TL. Find the substitution effect and income effect, on chocolate, of this price change.
Charlie has the utility function U(xA, xB) = xAxB. His indifference curve passing through 35 apples and 18 bananas will also pass through the point where he consumes 5 apples and Select one
Yam has the following utility function for Apples (X1) and Ice Cream (X2), U(X1,X2) = Min{3X1,X2}. Yam likes to get more of both Apples and Ice Cream. Suppose Yam has an income of M = $160 budgeted to be spend on these two goods and the prices of Apples and Ice Cream are p1 =$2, p2 =$1. Yam's optimal consumption of Apples is and Ice Cream is (Please put your answer in numerical values with no comma or decimal place.) Suppose a quantity tax of $1 is imposed on Ice Cream. Yam's after tax optimal consumption of Apples is and Ice Cream is (Please put your answer in numerical values with no comma or decimal place.) Suppose instead of the quantity tax, the government choose to impose a lump-sum tax of $20. After the imposition of the lump-sum tax, Yam's optimal consumption of Apples is and Ice Cream is (Please put your answer in numerical values with no comma or decimal place.) If government would have to impose one of these 2 kinds of taxes, which of these types of tax would be better…
Suppose Jeff has a perfect substitute preferences for watching movies (M) and TV (T) shows. Jeff's MRSTM is such that he is always indifferent between watching one movie and five TV shows independent of the amount of goods consumed. Which of the following statements is true? If Jeff had a choice between 1 movie and 1 TV show before bed, he would choose to watch the movie. If Jeff has already watched 3 movies and no TV shows, then he would prefer to watch a TV show next. He is indifferent between watching 1 TV show or 1 movie before bed. Jeff would prefer watching 2 TV shows and no movies over watching 2 Movies and no TV shows.
When plotted Sarah's indifference curve for coffee and tea reveals parallel indifference curves that always have a slope of -1. Suppose that Sarah's budget constraint is 20 -1.5C+1.0T where C is the quantity of coffee and T is tea. If Sarah wants to maximize utility, she will buy: a) equal amount of coffee and tea b) coffee only c) tea only d) more coffee than tea e) a combination of coffee and tea cannot be determined from the information given
Suppose that the only items you consume are bread and wine. If the price of bread were to increase tomorrow, and if simultaneously your income were to increase by just enough so that you were equally as happy tomorrow as today, what would happen to the level of your consumption of bread ? Illustrate your answer with indifference curves
Illustrate and explain how consumer equilibrium is achieved using the indifference curve?
2nd attempt Greg has the following utility function: u = x0.55x0.45. He has an income of $96.00, and he faces these prices: (P1, P2) (10.00, 8.00). Suppose that the price of x₁ increases by $1.00. Calculate the compensating variation for this price change. Give your answer to two decimals. $ =

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