In 2005, suppose a typical U.S. owner of a home theater (a television and a DVD player) bought 8 music CDs (q₁) per year and 24 top-20 movie DVDs (92) per year. The average price of a CD was about p₁ = $15, the average price of a DVD was roughly p₂ = $20, and the typical consumer spent $600 on these entertainment goods. We'll call this typical consumer Barbara. We estimate her Cobb-Douglas utility function as 0.2 0.8 U(91, 92)=91₁ 9₂ Use the 3-point curved line drawing tool to draw Barbara's annual demand curve for CDs, using prices of $15, $30, and $60 as your control points. Carefully follow the instructions above, and only draw the required object. Explain the shape of the price-consumption curve for changes in the price of good q₁- The equation for Barbara's price-consumption curve for changes in the price of good q₁ is 92 (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the character.)
In 2005, suppose a typical U.S. owner of a home theater (a television and a DVD player) bought 8 music CDs (q₁) per year and 24 top-20 movie DVDs (92) per year. The average price of a CD was about p₁ = $15, the average price of a DVD was roughly p₂ = $20, and the typical consumer spent $600 on these entertainment goods. We'll call this typical consumer Barbara. We estimate her Cobb-Douglas utility function as 0.2 0.8 U(91, 92)=91₁ 9₂ Use the 3-point curved line drawing tool to draw Barbara's annual demand curve for CDs, using prices of $15, $30, and $60 as your control points. Carefully follow the instructions above, and only draw the required object. Explain the shape of the price-consumption curve for changes in the price of good q₁- The equation for Barbara's price-consumption curve for changes in the price of good q₁ is 92 (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the character.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:In 2005, suppose a typical U.S. owner of a home theater (a
television and a DVD player) bought 8 music CDs (q₁) per
year and 24 top-20 movie DVDs (9₂) per year. The average
price of a CD was about p₁ = $15, the average price of a
DVD was roughly p₂ = $20, and the typical consumer spent
$600 on these entertainment goods. We'll call this typical
consumer Barbara. We estimate her Cobb-Douglas utility
function as
0.2 0.8
U(91, 92)=91 9₂
Use the 3-point curved line drawing tool to draw Barbara's
annual demand curve for CDs, using prices of $15, $30, and
$60 as your control points.
Carefully follow the instructions above, and only draw the
required object.
Explain the shape of the price-consumption curve for
changes in the price of good q₁.
The equation for Barbara's price-consumption curve for
changes in the price of good q₁ is
|91
92 =
(Properly format your expression using the tools in
the palette. Hover over tools to see keyboard shortcuts. E.g.,
a subscript can be created with the_ character.)
p. price per CD
70-
65+
60+
55+
50+
45-
40-
35+
30-
25-
20-
15-
10-
5-
Demand
8
Quantity, CDs per year
10
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