Imagine that Kroger and Albertsons are the only grocery stores available to consumers in your town. a. Draw a graph in which you highlight how the budget line would change after the merger for groceries relative to all other goods if the price of groceries would increase (i.e., the FTC would be right). You can assume the price of all other goods is constant. b. Draw a graph in which you highlight how the budget line would change after the merger for groceries relative to all other goods if the price of groceries would decrease (i.e., the Kroger would be right). You can assume the price of all other goods is constant. c. Compare the two graphs and explain in writing how each scenario would impact a consumer's optimal consumption point. Assume that groceries are a normal good and use indifference curves to show changes in consumer satisfaction
Imagine that Kroger and Albertsons are the only grocery stores available to consumers in your town. a. Draw a graph in which you highlight how the budget line would change after the merger for groceries relative to all other goods if the price of groceries would increase (i.e., the FTC would be right). You can assume the price of all other goods is constant. b. Draw a graph in which you highlight how the budget line would change after the merger for groceries relative to all other goods if the price of groceries would decrease (i.e., the Kroger would be right). You can assume the price of all other goods is constant. c. Compare the two graphs and explain in writing how each scenario would impact a consumer's optimal consumption point. Assume that groceries are a normal good and use indifference curves to show changes in consumer satisfaction
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 5SQP
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Transcribed Image Text:Imagine that Kroger and Albertsons are the only grocery stores available to consumers in
your town.
a. Draw a graph in which you highlight how the budget line would change after the
merger for groceries relative to all other goods if the price of groceries would
increase (i.e., the FTC would be right). You can assume the price of all other
goods is constant.
b. Draw a graph in which you highlight how the budget line would change after the
merger for groceries relative to all other goods if the price of groceries would
decrease (i.e., the Kroger would be right). You can assume the price of all other
goods is constant.
c. Compare the two graphs and explain in writing how each scenario would impact a
consumer's optimal consumption point. Assume that groceries are a normal good
and use indifference curves to show changes in consumer satisfaction
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