ii. Mr. Robinson makes $200 a week and spends his entire income on running shoes and basketball shorts. a. Write down the algebraic expression for his budget constraint if running shoes and basketball shorts cost $20 each. How many of each good will he buy? b. Write down the algebraic expression for Mr. Robison's budget constraint if the price of basketball shorts rises to $30 each. How many of each good will he buy? c. Illustrate the results in parts (a) and (c) and provide a decomposition of the income and substitution effect.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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NO HELP WITH PART A. 

QUESTION ii a, b and c to be answered please. 

No handwriting please. I have a hard time understanding. 

Question 3
i.
Douglas allocates his budget of $24 per week to 3 goods, cereal, books and
clothing. Use the table below to answer the following question
Total Utility of
Total Utility of
Total Utility of
Clothing
25
Quantity
Cereal
Вooks
1
50
75
2
90
135
45
120
60
70
78
3
175
205
225
4
140
155
a. If the price of cereal is $2, the price of books is $3 and the price of clothing
is $1, at what point does Douglas maximize his utility? Explain.
ii.
Mr. Robinson makes $200 a week and spends his entire income on running
shoes and basketball shorts.
a. Write down the algebraic expression for his budget constraint if running
shoes and basketball shorts cost $20 each. How many of each good will he
buy?
b. Write down the algebraic expression for Mr. Robison's budget constraint if
the price of basketball shorts rises to $30 each. How many of each good will
he buy
c. Illustrate the results in parts (a) and (c) and provide a decomposition of the
income and substitution effect.
Transcribed Image Text:Question 3 i. Douglas allocates his budget of $24 per week to 3 goods, cereal, books and clothing. Use the table below to answer the following question Total Utility of Total Utility of Total Utility of Clothing 25 Quantity Cereal Вooks 1 50 75 2 90 135 45 120 60 70 78 3 175 205 225 4 140 155 a. If the price of cereal is $2, the price of books is $3 and the price of clothing is $1, at what point does Douglas maximize his utility? Explain. ii. Mr. Robinson makes $200 a week and spends his entire income on running shoes and basketball shorts. a. Write down the algebraic expression for his budget constraint if running shoes and basketball shorts cost $20 each. How many of each good will he buy? b. Write down the algebraic expression for Mr. Robison's budget constraint if the price of basketball shorts rises to $30 each. How many of each good will he buy c. Illustrate the results in parts (a) and (c) and provide a decomposition of the income and substitution effect.
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