John is indifferent between canned soup and fresh soup. Canned soup sells for $1 per serving and fresh soup sells for $2 per serving. Assuming that John has allocated $4 toward soup, how will he spend it? Explain your answer by drawing John's budget line and indifference curves.
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John is indifferent between canned soup and fresh soup. Canned soup sells for $1 per serving and fresh soup sells for $2 per serving. Assuming that John has allocated $4 toward soup, how will he spend it? Explain your answer by drawing John's budget line and indifference
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- Bruno can spend his income on two different goods: smoothies and energy bars. For each of the following three situations, decide if the given consumption bundle is within Bruno’s consumption possibilities. Then decide if it lies on the budget line or not. Smoothies cost $2 each, and energy bars cost $3 each. Bruno has income of $60. He is considering a consumption bundle containing 15 smoothies and 10 energy bars. Smoothies cost $2 each, and energy bars cost $5 each. Bruno has income of $110. He is considering a consumption bundle containing 20 smoothies and 10 energy bars. Smoothies cost $3 each, and energy bars cost $10 each. Bruno has income of $50. He is considering a consumption bundle containing 10 smoothies and 3 energy bars.Jordan eats two types of fruits – oranges and mangos. He has a budget of $60 to spend on fruits per month. The price of oranges is $4 per bag and that of mangos is $12 per bag. With this information, answer the questions below. Graph Jordan’s budget line by plotting oranges on the horizontal axis and find the slope of his budget line. State the budget equation for Jordan’s consumption of fruits (oranges on the horizontal axis). Suppose the price of oranges has doubled. Show this effect graphically (initial + new budget line) and calculate the slope of the new budget line (oranges on the horizontal axis). Suppose Jordan now reduces the money spent on fruits to $50. Show this budget line change on a graph (oranges on the horizontal axis; price of oranges is $4 and price of mangos is $12). (Emily is a utility maximizer. Her income is $100, which she can spend on cafeteria meals and on notepads. Each meal costs $5 and each notepad costs $2. At these prices Emily chooses to buy 16 cafeteria meals and 10 notepads. a) Draw a diagram that shows Emily’s choice using an indifference curve and her budget line, placing notepads on the vertical axis and cafeteria meals on the horizontal axis. Label the indifference curve, I1, and the budget line BL1. Make sure you calculate the endpoints of the budget constraint. b) The price of notepads falls to $1; the price of cafeteria meals remains the same. On the same diagram, draw Emily’s budget line with the new prices and label it BL2. c) Lastly, Emily’s income falls to $90. On the same diagram, draw his budget line with this income and the new prices and label it BL3. Is she worse off, better off, or equally as well off with these new prices and lower income than compared to the original prices and higher income?
- Marie has a weekly budget of $2400, which she likes to spend on magazines and pies. If the price of one magazine is $40, what is the maximum number of magazines she can buy in a week? If the price of a pie is $120, what is the maximum number of pies she can buy in a week? Compute and show Marie’s budget schedule for pies and magazines. Draw Marie’s budget line with pies on the horizontal axis and magazines on the vertical axis.Troy has preferences for laptops (L), and drones (D). Laptops costs $750 a unit and drones costs $2000 a unit. Troy has $15000 to spend on both goods. 1. It is known that the indifference curve is convex. What does this tell you about the relationship between the goods?The figure below shows two of Josie's indifference curves between peaches and cream, as well as her budget constraint (the straight line). Josie, with an income of $32, faces prices of $4 for both peaches and cream. She is currently maximizing utility by consuming 4 peaches and 4 creams. Highlight Josie's current bundle. Then, show what happens to her utility maximizing bundle when Josie's income falls to $20 by drawing a new budget constraint and placing a point Josie's new bundle. Segment • Point * Undo * Redo x Reset 10 8 5. 4 3 2 1 10 Peaches
- The marginal utility for shoes and coffee is given below for five individuals. A pair of shoes costs $2, and a cup of coffee costs $1. Which of these consumers are optimizing over their choices? Explain For those who are not, how should they adjust their spending? Explain “Pasta is Miguel’s favorite meal therefore the law of diminishing marginal utility does not apply”. Do you agree with this statement? It is known that the indifference curve is convex. What does this tell you about the relationship between the goods? The income effect and the substitution effect work in the same direction for a normal good. Explain how this differs for an inferior good.In the following budget constraint- indifference curve graph, Nikki has $170 to spend on tops and pants. a. What is the price of a top? $ What is the price of a pair of pants? $ b. Is Nikki making the optimum choice if she buys 4 tops and 2 pants? OA. Yes, this point is on the budget constraint. OB. No, the indifference curve going through this point is not tangent to Nikki's budget constraint. OC. No, the other point of intersection of the indifference curve and the budget constraint is the optimal choice. OD. Yes, the indifference curve going through this point is tangent to Nikki's budget constraint. L Tops 10- 6 9- 8- G 7- 6- 3- 2- 1- 13 5 Pants 7 8 9 10 11 12Question 3: Samantha has $3,000 to spend on two goods: sandwiches and beer. The price of a sandwich is $6 and price of a beer is $5. a) Draw Samantha's budget line. Put beer on the horizontal axis. b) If Samantha's optimal consumption bundle contains 400 sandwiches, how many beer does her optimal consumption bundle contain? Show her optimal consumption in the graph above. c) Draw Samantha's indifference curve crossing her optimal consumption bundle.
- Sonia likes cupcakes and tea. She has Rs.100 to spend on cupcakes and tea; cupcakes cost Rs.20 each, and cups of tea cost Rs.10 each. Sketch her budget constraint on a graph with cupcakes on the horizontal axis and cups of tea on the vertical axis. Sonia also has a calorie constraint: she can only consume 800 calories, and each cupcake has 200 calories, while tea has no calories. On your graph, sketch in Sonias calorie constraint and indicate her budget set - the set of feasible combinations of cupcakes and tea given her two constraints. Label all the kinks of Sonias budget set with their coordinates.Suppose Sam has a weekly budget of $48 to spend on juice and yogurt. Juice is priced at $4 per gallon, and yogurt is priced at $2 per container. gallons of juice. If he spends his entire $48 on yogurt, he can buy containers of If Sam spends his entire $48 on juice, he can buy yogurt. Use the blue line (circle symbol) to plot Sam's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of juice and yogurt that are affordable for Sam. Finally, place the black point (plus symbol) on the point on Sam's budget constraint that corresponds to a scenario in which Sam spends $24 on each good. Note: Dashed drop lines will automatically extend to both axes. ? 36 33 30 27 24 21 18 12 9 6 3 YOGURT (Containers) 0 0 + 3 6 9 12 15 18 21 JUICE (Gallons) 24 27 30 33 36 BC, ($48) 0 Affordable Region $24 on Each BC₂ ($60)