Homework Help is Here – Start Your Trial Now!
Business
Economics
d. Show with Equations and a Graph what happens to the Demand Curve if      Income increases to 100?

d. Show with Equations and a Graph what happens to the Demand Curve if      Income increases to 100?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question
100%

PS2(3d)

Question: d – Only!!!

d. Show with Equations and a Graph what happens to the Demand Curve if

     Income increases to 100?

 

Using the Bartleby’s Expert Solutions for Previous Questions a & b ↓

 

Previous Questions a & b:  Already Answered!!!

  1. What is the Consumer’s Utility Maximizing Combination of Goodx & Goody &

    Why?

Bartleby’s Expert Answer:

Consumer’s Utility Maximizing Combination is:

  qx = 4.8

       &

  qy = 2.4

  1. What is qx at px = 15?

Bartleby’s Expert Answer:

At px = 15

                 qx = 3.6

Given:

Consumer’s Utility Function → U = 4qx * qy

qx = Quantity Demanded for Goodx

qy = Quantity Demanded for Goody

Marginal Rate of Substitution → MRS = qy / qx

Consumer’s Current Income → I = 60

Price of Goodx → px = 10

Price of Goody → py = 5

 

 

Answers / Information by A Bartleby’s Expert from Previous Questions

 

Equation for Budget Line is:

10qx + 5qy = 60

At Optimum,

MRS = px / py

Therefore,

qx / qy = 10/5

qx / qy = 2

qx = 2qy

Inserting this into Budget Line, we get:

10(2qy) + 5qy = 60

Therefore, Consumer’s Utility Maximizing Combination is:

 qx = 4.8

     &

qy = 2.4

When Price of qx increases to 15, New Budget Equation will be:

15qx + 5qy = 60

At Optimum,

qx / qy = 15/5

 = 3

       qx = 3qy

Inserting this into Budget Line, we get

15(3qy) + 5qy = 60

       qy = 1.2

       qx = 3(1.2) = 3.6

Therefore, Consumer's Utility Maximizing Combination is:

       qx = 3.6

           &

        qy = 1.2

Expert Solution
Step 1: Determine the given variables and function:

The utility function:U equals q subscript x q subscript y

The prices of good x and good y are p subscript x space a n d space p subscript y respectively. Income is denoted by M.

Therefore the budget line equation: p subscript x q subscript x plus p subscript y q subscript y equals M

Initial income is 60.

Income in subpart d is 100.

To draw the demand curve, the demand equation needed to be calculated by solving the utility maximization condition.

M R S equals p subscript x over p subscript y


steps

Step by step

Solved in 4 steps with 15 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Commodity Price
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
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS