(Figure: Books and Paintings I) Which of the following statements about the curve that goes through the points A, B, C, and Dis FALSE? Books 10- 9 8 7 6 4 3 1 0 th 1 2 3 4 5 6 7 8 9 10 Paintings The curve shows how consumption of each good changes with price. The slope of the curve determines whether the goods are normal versus inferior. Each point represents a utility maximizing bundle of goods given the consumer's budget. The curve shows how consumption of each good changes with income.

(Figure: Books and Paintings I) Which of the following statements about the curve that goes through the points A, B, C, and Dis FALSE? Books 10- 9 8 7 6 4 3 1 0 th 1 2 3 4 5 6 7 8 9 10 Paintings The curve shows how consumption of each good changes with price. The slope of the curve determines whether the goods are normal versus inferior. Each point represents a utility maximizing bundle of goods given the consumer's budget. The curve shows how consumption of each good changes with income.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. The elasticity of substitution will be a lower number: (a) The less curved is the indifference curve (b) The more curved is the indifference curve (c) The greater the income elasticity of demand of the good on the horizontal axis (d) The greater the degree of substitutability between the two goods (e) If tastes are both homothetic and quasilinear
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1 The Law of Diminishing Utility: For example, I consume too many apples. Until I eat the fifth one, I start getting sick of it so the net total utility is starting to fall. I park in a car park and when I park there for 6 hours, it is getting more expensive so I prefer to leave early. Is this an example of diminishing utility?
6. Part a and Part B
4. Suppose that a decrease in the price of X results in more of good Y sold. What are X and Y called? a. complementary goods b. normal goods c. inferior goods d. substitute goods
6. Suppose the following information regarding Joe's consumption habits. Quantity of Wine Quantity of Вooks Price of Wine Price of Books Income $10 $12 $15 $20 $10 $10 $10 $10 $150 $150 $150 $150 7 5 9 4 9 2 11 Graph Joe's demand curve for wine and price-consumption curve for when the price of wine changes.
3. Refer to the information provided in Figure below to answer the following questions. Price of pizza +6 0 A B D₁ D₂ Number of pizzas per month D3 a. Under what situation consumer moves from A to B? When they move from C to A? Explain the reasons in both cases. b. Imagine your demand curve for pizza last year was D3. Now the demand is D1. Write down possible reasons for this. Explain this carefully c. Can you expect the demand to increase at the same price? Explain the reasons carefully. d. Can you expect the demand to decrease at the same price? Explain this carefully.
05- Income and Substitution Effects Question 5
4. The following questions refer to the following graph of a consumer's indifference curve. a. b. Quantity of Y 40 30 20 10 0 T I A 10 C B 1 20 30 40 Quantity of X X What is the consumer's marginal rate of substitution between points A and C? At point C, approximately what is the consumer's marginal rate of substitution at point?
. (Figure 4.13) What rotated the budget constraint? Quantity of good Y 10 9 8 7 6 5 N WAS 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 Quantity of good X an increase in the price of good X a decrease in income an increase in the price of good Y a decrease in the price of good Y
2. Draw a budget constraint, indifference curves, and the consumer's optimal point for pizza and Pepsi. Show what happens to the budget constraint and the consumer's optimum when the price of pizza increases.