d. Find the new utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of Ramen Riley will now buy. e. Find the size and direction (positive or negative) of the substitution effect. As part of your answer, state the starting quantity and ending quantity of bowls of ramen that represent this effect. f. Find the size and direction (positive or negative) of the income effect. As part of your answer, state the starting quantity and ending quantity of bowls of ramen that represent this effect.
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Utility maximizing, substitution effect
I have A-C answered, just need parts D-G, graph is included
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- Riley has $6 to spend on ramen and apps for their phone. The price of a bowl of ramen is $2, and the price of an app is $1. Riley's preferences for ramen and apps are represented by the indifference curves on the next page. a. Determine which line (L1, L2, L3, L4, or L5) represents Riley's budget constraint. b. Find the utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of ramen Riley will buy. Suppose now that the price of a bowl of ramen is discounted for students to $1 per bowl. c. Determine which line (L1, L2, L3, L4, or L5) represents Riley's new budget constraint. d. Find the new utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of Ramen Riley will now buy. e. Find the size and direction (positive or negative) of the substitution effect. As part of your answer, state the starting quantity and ending quantity of bowls of ramen that represent this effect. f. Find the size and direction (positive or negative) of…Farah has $100 to spend each month on bread and chicken. Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound. Draw her budget constraint and label it BC0. Put bread on the horizontal axis and chicken on the vertical axis. Be sure to identify the intercept values. Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken. On the same graph you drew in part (a), draw an indifference curve to identify her optimal bundle. Label this bundle "E." Is her budget exhausted? Verify your answer. Now suppose Farah's income falls so that she can now devote only $80 to the two goods. Prices however remain unchanged. In the same diagram, graph her new budget constraint and label it BC1. Be sure to identify any new intercept values. Following the change in income, can Farah consume the same bundle "E"? Explain your answer. What must happen to her total utility following the decrease in her income?Alex has a monthly budget of $72 to spend on commuter train trips and organic pasta. Each train trip costs $12; each box of pasta costs $6. Alex's preferences for train travel and pasta are represented by the indifference map on the following page. a. Determine which line (L1, L2, L*, or L**) represents Alex's budget constraint. b. Find their utility-maximizing bundle (E1, E2, e*, or e**). How many train trips will Alex take? Suppose the state government establishes a program to subsidize public transportation for commuters, such that each train trip now costs Alex $6. c. Determine which line (L1, L2, L*, or L**) represents Alex's new budget constraint. d. Find their new utility-maximizing bundle (E1, E2, e*, or e**). Determine how many train trips Alex will now take. e. Find the size and direction (positive or negative) of the substitution effect for train trips. As part of your answer, state the starting quantity and ending quantity of train trips that represent this effect. f. Find…
- Kim has $40 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $10 while each yoga class costs $5. a. Graph Kim’s budget constraint, with movies on the x-axis and yoga on the y-axis. What is the value of the x-intercept? What is the value of the y-intercept? What is the slope of this budget constraint? Suppose the total utility from each of these activities is listed in the table below. What is Kim's utility maximizing point? Movies Total Utility Yoga Classes Total Utility 0 0 0 0 1 40 1 30 2 70 2 55 3 90 3 75 4 95 4 90 5 100 5 100 6 105 6 105 movies and yoga classes How much total utility does she obtain from this combination? c. Suppose the price of movies drops to $5 each. What is her new optimal consumption choice? The new slope of her budget constraint is? Kim will choose to consume how many movies and how many yoga…8. Normal and inferior goods Antonio likes going to the ballpark to watch baseball, and he also is fond of going to the theater to listen to the symphony orchestra. The following diagram shows two of Antonio's indifference curves for going to ballgames and symphonies. With Antonio's initial budget constraint (BC1), he chose to go to four symphonies and six baseball games per month (point X). Then his budget constraint shifted to BC2, and he chose to go to five symphonies and three ballgames per month (point Y). BALLGAMES 3 8 10 0 4 5 SYMPHONIES BC 8 BC 10 ? Of the following choices, which could have shifted Antonio's budget constraint from BC₁ to BC2? Check all that apply. His income increased while the prices of baseball and symphony tickets stayed the same. The prices of both baseball and symphony tickets increased while his income stayed the same. His income decreased while the prices of baseball and symphony tickets stayed the same. normal The price of symphony tickets increased…Currently, Paula is maximizing utility by purchasing five TV dinners (T) and four LeanCuisine Meals (L) each week. Suppose both T and L cost $5 each.a. Graph Paula’s initial utility-maximizing choice.b. Suppose the price of T falls by $1 and the price of L rises by $1.25. Can Paula stillafford to buy her initial consumption choices? What do you know about her new budgetconstraint?c. Make a new graph to show why Paula will choose to consume more T and less Lgiven her new budget constraint to maximize utility. Is her utility increased, decreased,or unchanged given the price change? [Hint: try to make the graph as big as possible tosee how the utility is tangent/intersects with the lines more easily] d. In part (b), suppose another scenario where the price of T rises by $1 and the priceof L falls by $1.25. Is Paula’s utility increased, decreased, or unchanged given the pricechange?
- 8. Normal and inferior goods Shen likes going to the ballpark to watch baseball, and he also is fond of going to the theater to listen to the symphony orchestra. The following diagram shows two of Shen's Indifference curves for going to ballgames and symphonies. With Shen's initial budget constraint (BC₁), he chose to go to five symphonies and three baseball games per month (point X). Then his budget constraint shifted to BC₂, and he chose to go to four symphonies and six ballgames per month (point Y). BALLGAMES 0 0 5 SYMPHONIES BC 8 goods. BC 10 ? of the following choices, which could have shifted Shen's budget constraint from BC, to BC₂? Check all that apply. The price of baseball tickets Increased while his income and the price of symphony tickets stayed the same. The prices of both baseball and symphony tickets decreased while his income stayed the same. His Income increased while the prices of baseball and symphony tickets stayed the same. His Income decreased while the prices of…Rick eats only french fries and burgers at his office cafeteria. His weekly lunch budget is $48. Each burger costs $6 and each order of fries costs $3. When deciding how much of each good to buy, Rick knows that 2 burgers and 4 orders of french fries will give him a utility of 8. At his utility-maximizing point, Rick's utility is:The marginal utility for shoes and coffee is given below for five individuals. A pair of shoes costs $2, and a cup of coffee costs $1. Which of these consumers are optimizing over their choices? Explain For those who are not, how should they adjust their spending? Explain “Pasta is Miguel’s favorite meal therefore the law of diminishing marginal utility does not apply”. Do you agree with this statement? It is known that the indifference curve is convex. What does this tell you about the relationship between the goods? The income effect and the substitution effect work in the same direction for a normal good. Explain how this differs for an inferior good.
- 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?Yunqin always gets twice as much satisfaction from an extra burger as he does from an extra Boost juice. Draw (for yourself) three indifference curves for him on a graph - passing through the bundles (2 juices, O burgers), (4 juices, 0 burgers) and (5 juices, O burgers) respectively. Qourger 2 1 1 2 3 4 5 Qjuice The graph above includes two budget lines with different slopes to help you answer the following question. Which conclusions can you draw about Yunqin's utility maximising choices? Select all that applies. Yunqin would never consume both burgers and juice at the same time Yunqin always consumes only juice if Yunqin' budget line is flatter than his indifference curves, then he consumes only juice if the ratio of the price of burger to the price of juice is larger than 2, then Yunqin consumes only juice13. Shawn likes to consume pineapple smoothies and hotdogs. His preferences are represented by the utility function U(x,y) = 34x - x²/2 + y where x is his consumption of pineapple smoothies and y is his consumption of hotdogs. The price of pineapple smoothies is $2 and the price of hotdogs is $1. If the price of pineapple smoothies increases to $6, the change in Shawn's consumer surplus is: A) -144 B) -128 C) -120 D) -112 E) -90