Consider the figure above, which shows the budget constraint and the indifference curves of good King Zog. Zog is in equilibrium with an income of $300, facing prices P-$4 and P-$10. a. How much X does Zog consume? b. If the price of X falls to $2,50, while income and the price of Y stay constant, how much X will Zog consume? c. How much income must be taken away from Zog to isolate the Hicksian income and substitution effects (i.e., to make him just able to afford to reach his old indifference curve at new prices)? d. The total effect of the price change is to change consumption from the point to the point e. The income effect corresponds to the movement from the point the substitution effect corresponds to the movement from the point f. Is Xa normal good or an inferior good? to the point to the point while

Consider the figure above, which shows the budget constraint and the indifference curves of good King Zog. Zog is in equilibrium with an income of $300, facing prices P-$4 and P-$10. a. How much X does Zog consume? b. If the price of X falls to $2,50, while income and the price of Y stay constant, how much X will Zog consume? c. How much income must be taken away from Zog to isolate the Hicksian income and substitution effects (i.e., to make him just able to afford to reach his old indifference curve at new prices)? d. The total effect of the price change is to change consumption from the point to the point e. The income effect corresponds to the movement from the point the substitution effect corresponds to the movement from the point f. Is Xa normal good or an inferior good? to the point to the point while

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 3: Robert's utility is given by U(x,x)=ln x + ln y, and therefore MUX-1/x and MUX-1/y. Let the prices and income be Px. Py and m. a. Find Robert's demand for x and y b. How is Robert's demand for x affected by an increase in Py? Explain
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Suppose that, by law, a person is required to consume a fixed amount of good X, say X0. Assuming X is a normal good, explain how this law reduces utility for both high and low income people.
When Sam has an income of 1.000 , he consumes 30 units of good A and 50 units of good B After Sam's income increases to $1,500 , he consumers 60 units of good A and 40 units of good B. Which of the following statements is correct ? a- Good A is a normal good and good B is an inferior good b- Both goods A and B are inferior goods c- Good A is an inferior good, and good B is a normal good d- Both goods A and B are normal goods
use the demand function below to answer the questions that follows Qdx = 3/4 - 1/3Px - 5Py + 2Pz - 2/10M a. identify which type of goods is Pz and explain it b. identify which type of good is M and explain it c. identify which type of good is Py and explain it
use the demand function below to answer the questions that follows Qdx = 3/4 - 1/3Px - 5Py + 2Pz - 2/10M a. identify which type of goods is Pz and explain it b. identify which type of good is M and explain it c. identify which type of good is Py and explain it
David perceives canned tuna (Y) as an inferior good and fresh tuna (X) as a normal good. If his income increases by 100%, and his income elasticity of both types of tuna is 1. Show the effect of this increase in income on the change in his optimal choice of canned and fresh tuna, highlighting his income-consumption curve. Clearly label your graph. Reflect the proportional changes in your graph.
Problem 1 In the following scenarios, is the good described a normal good, an inferior good, or is there not enough information to say? Briefly justify your answer. a) Richard's income doubles and he goes from buying 4 apples per week to buying 5 apples per week. The prices of apples and any related goods do not change. b) Terri's income goes down by 50% and she goes from buying a bottle of tequila every week to buying one every month. At the same time, the price of tequila doubles. c) The price of potatoes goes up by 20% and Seamus buys 10% more potatoes. His income and the prices of related goods do not change. Hint: think about this one in the context of another topic you learned about this week.
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A consumer has income of $15,000. Masks costs $35 per mask, and sanitizers costs $70 per bottle. solve questions 4 and 5 Draw the consumer’s budget constraint (put mask on the horizontal axis). What is the slope of this budget constraint? Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both masks and sanitizers are normal goods. Illustrate what happens if a mask is an inferior good. The price of masks rises from $35 to $40 per mask, while the price of sanitizers is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects. Under what circumstance(s) if any can an increase in the price of sanitizers induce a consumer to buy more of that good? Explain. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.