Figure (a) shows the change of consumer equilibrium as the price of food decreases holding income and the price of clothing fixed. Figure (b) gives the demand curve. In Figure (b), which point represents the highest level of utility, point E, G or H? Why? Clothing (units per month) 6 5 4 Price of food $2.00 1.50 1.00 0.50 4 U₁ B 12 12 Price-Consumption Curve U₂ (b) 20 D 20 H U₂ Food (units per month) Demand Curve Food (units per month)

Figure (a) shows the change of consumer equilibrium as the price of food decreases holding income and the price of clothing fixed. Figure (b) gives the demand curve. In Figure (b), which point represents the highest level of utility, point E, G or H? Why? Clothing (units per month) 6 5 4 Price of food $2.00 1.50 1.00 0.50 4 U₁ B 12 12 Price-Consumption Curve U₂ (b) 20 D 20 H U₂ Food (units per month) Demand Curve Food (units per month)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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