Mrs. Griffiths earns $5000 a week and spends her entire income on dresses and handbags,since these are the only two items that provide her utility. Furthermore, Mrs. Griffithsinsists that for every dress she buys, she must also buy a handbag.i What is the algebraic equation for Mrs. Griffiths budget constraint if dresses costS25 each and handbags cost $14 each? How many of each good will che buy andrepresent this on a budget line with handbags on the horizontal axis.Draw an indifference curve showing the optimum choice. Label the optimum asii.3.point A. What would be the marginal rate of substitution at the point thatcorresponds to the optimal consumption choice? Interpret the marginal rate ofsubstitution.ii. Suppose the price of a dresses increases to $200 and income decreases to $4200.What is the new algebraic equation for Mrs. Griffiths budget constraint? Show theimpact of the new budget line relative to the original budget line

Person G's income was $5000 and the person prefers to buy two commodities together in 1:1 ratio,…

Mrs. Griffiths earns $5000 a week and spends her entire income on dresses and handbags, since these are the only two items that provide her utility. Furthermore, Mrs. Griffiths insists that for every dress she buys, she must also buy a handbag. i What is the algebraic equation for Mrs. Griffiths budget constraint if dresses cost S25 each and handbags cost $14 each? How many of each good will she buy and represent this on a budget line with handbags on the horizontal axis. ii. i. Draw an indifference curve showing the optimum choice. Label the optimum as

Mrs. Griffiths earns $5000 a week and spends her entire income on dresses and handbags, since these are the only two items that provide her utility. Furthermore, Mrs. Griffiths insists that for every dress she buys, she must also buy a handbag. i What is the algebraic equation for Mrs. Griffiths budget constraint if dresses cost S25 each and handbags cost $14 each? How many of each good will she buy and represent this on a budget line with handbags on the horizontal axis. ii. i. Draw an indifference curve showing the optimum choice. Label the optimum as

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Mrs. Griffiths earns $5000 a week and spends her entire income on dresses and handbags,
since these are the only two items that provide her utility. Furthermore, Mrs. Griffiths
insists that for every dress she buys, she must also buy a handbag.
i What is the algebraic equation for Mrs. Griffiths budget constraint if dresses cost
S25 each and handbags cost $14 each? How many of each good will che buy and
represent this on a budget line with handbags on the horizontal axis.
Draw an indifference curve showing the optimum choice. Label the optimum as
ii.
3.
point A. What would be the marginal rate of substitution at the point that
corresponds to the optimal consumption choice? Interpret the marginal rate of
substitution.
ii. Suppose the price of a dresses increases to $200 and income decreases to $4200.
What is the new algebraic equation for Mrs. Griffiths budget constraint? Show the
impact of the new budget line relative to the original budget line

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