Please correct answer and don't use hand rating Problem 1: Budget set with couponsBob goes to the supermarket to buy milk and cereal. He has $20 tospend. A consumption bundle consists of a quantity of milk, x (liters),and a quantity of cereal, y (grams). For all of the following questionsyou can assume that the consumption set is R2. This means that milkand cereal can be consumed in any non-negative quantity.=(a) The price of milk at the supermarket is px 4$/liter. The priceof cereal is 0.2cents/gram. Draw Bob's budget set. What is theslope of the budget line?(b) Bob notices that the supermarket has a special coupon. A couponstates: "Buy 1 liter of milk and get 1 box of cereal for free". A boxof cereal has 2000 grams of cereal in it. Each shopper is limitedto one coupon. Draw Bob's budget set with 1 coupon. (Hint: Becareful with units again).(c) Due to popular demand, the supermarket extends its special of-fer. Each customer is now allowed to use 2 coupons. Draw Bob's1

Part (a): Bob's Budget Set and Slope of the Budget LineBudget: $20Price of milk: $4/literPrice of…

Answered: Problem 1: Budget set with coupons Bob…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 3SQP

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Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
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* Would you expect marginal utility to rise or fall with additional consumptionof a good? Why? * Tarik consumes bread and sausages. He has decided that his monthly budgetwill be $1400. Suppose that one bread costs $35, while one sausage costs $40.i. What is the expression for Tarik’s budget constraint? ii. Draw a graph of Tarik’s budget line (bread on the y axis). iii. Show how Tarik’s budget line changes if the price of sausages increasesto $55. iv. Suppose Tarik decides to cut his monthly budget in half. Coincidentally,the next time he shops, he learns that bread and sausages are on sale forquarter of the price. Show what happens to Tarik’s budget line?
1. 2. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal rate of substitution? d. What two conditions must be met in order for Frank to maximize his utility? e. What are the utility maximizing quantities of plane trips and bus trips for Frank? Given income of $1000, Px = 25 and Py = 40, find (1) a function for the MRS and (2) the utility maximizing consumption bundle for each of the…
1. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal
If we have money, we buy goods and services to satisfy our needs. In economics, thesatisfaction that we get from the consumption of goods and services is called utility. Usea utility graph to explain what happen to the utility when you keep on increasing thenumber of units consumed. Also explain what happens to the utility when you keep onincreasing the number of units consumed. Also explain what happens to the additionalutility (i.e. additional satisfaction) when you increase your consumption by one unit
By definition, a budget constraint shows the consumption bundles that a consumer can afford. Assume that a college student spends her income on Mc-cheese and CD's. The price of one box of Mc-cheese is $1.00 and the price of one CD is $10.0 . If she has $90 of income, she could choose to consume : a- 10 boxes and 9 CDs b- 30 boxes and 7 CDs c- 25 boxes and 6 CDs d- 25 boxes and 8CDS
The budget set, or budget constraint, in the graph shows the possible combinations of brownies and ice cream cones that can be purchased. Assume that this person has a total of $18 to spend on brownies and ice cream cones. How much does a brownie cost? $ Assume that at point A, the marginal utility from a brownie is 10 and the marginal utility for an ice cream cone is 18. This person should consume more brownies and fewer ice cream cones. is utility maximizing. should consume more ice cream cones and fewer brownies.
Assume that a consumer has two goods to consume: medical care services (M) and all other goods (X). She has monthly income of $4000. a. Plot how the budget constraint should change when this consumer’s income increased to $8000. Remember to label the origin, axis, and intercepts on your graph.
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Suppose that a household has a weekly budget of $200 a week for its weekly shopping trip when it spends its weekly budget on toilet paper priced at $0.50 per roll and other goods. a. Draw a large diagram showing the household's weekly budget constraint for rolls of toilet paper and $ of other goods. Label the axes, the intercepts, the budget constraint and give the diagram a title. b. If the toilet paper and other goods are perfect complements and the household is observed to buy 24 rolls of toilet paper per week, draw an indifference curve that indicates this situation. Label the household's demands for toilet paper rolls and other goods and its indifference curve. C. Suppose a quota is introduced limiting purchases of toilet paper to 12 rolls per weekly shop. On the diagram from a. and b., draw the household's budget constraint and the highest indifference curve the household can reach. Label the household's budget constraint, demand for toilet paper rolls and other goods and the…

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