**Budgeting for Yarn Purchases with a Gift Card**Suppose you have a $20 gift card and want to buy blue and red yarn. The utility function from yards of blue (B) and red (R) yarn can be expressed as follows: U(B, R) = 3B + R.**Cost of Yarn:**- Red yarn costs $4 per yard.- Blue yarn costs $4 per yard.**Task:**A) Graph the budget constraint and the indifference curves that can be reached. How many yards of each type of yarn will be purchased at these prices with the gift card?**Instructions:**1. **Graph the Budget Constraint:** - Total budget: $20. - Cost of blue yarn (B) = $4B. - Cost of red yarn (R) = $4R. - Budget constraint equation: 4B + 4R = 20.2. **Plot Indifference Curves:** - Identify combinations of B and R that provide equal utility.3. **Determine Optimal Purchase:** - Find the combination of B and R that maximizes utility given the budget constraint.

budget constraint represents all the combinations of goods and services that a consumer may purchase…

Red yarn costs $4 per yard. blue yarn costs $4 per yard. A) Graph the budget constraint and the indifference curves that can be reached. How many yards of each type of yarn will he purchase at these prices with his gift card?

Red yarn costs $4 per yard. blue yarn costs $4 per yard. A) Graph the budget constraint and the indifference curves that can be reached. How many yards of each type of yarn will he purchase at these prices with his gift card?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: how do you find the marginal utilities of the goods with the information provided?

A: No expert do not claim to find both marginal utilities but rather the ratio of marginal utility

Q: Lee has calculated her marginal utility from buying pizza slices and soda (shown on the table in the…

A: The price of pizza is $2.00 The price of soda is $2.00

Q: What does the point on a budget line indicate in terms of prices?

A: # A budget line of the consume represents the price of the two goods and the budget of the income of…

Q: Using the concept of consumer choices, draw a graphical representation of utility maximization. Your…

A: The diagram is shown in the next step.

Q: Problem: Cans of dog food (cans per week) 20 16 4 0 4 8 12 16 20 24 Cans of cat food (cans per week)…

A: The budget line showcases the different combinations of goods that an individual can purchase for a…

Q: Consider a graph with paper on the x-axis and pencils on the y-axis. If the price of pencils…

A: Budget constraint shows the relationship between the two goods, their prices and the income of the…

Q: Describe how rational consumers maximize utility by comparing the marginal utility-to-price ratios…

A: Utility is defining as the level of satisfaction receives while consuming the goods and marginal…

Q: Calculate the Marginal Utility then the MU/P to find Consumer Optimum. How many drink(s) and Big…

A: PLease check the step 2 for solution

Q: Suppose you go to Trader Joe's to buy fruit for the week. You only like apples (A) and bananas (B)…

A: Preference is over apples and bananas.Income = $11Price of Apples = $1 Price of Bananas = 0.25 We…

Q: Total Utility of Digital Apps per Digital Apps per Period Period (utils) 0 1 2 3 4 5 0 50.0 95.0…

A: We have to find the optimum consumer bundle. and expenditure on it.Optimum Consumer Bundle: When a…

Q: entertainment budget is $150. Dan's best friend Jay tells Dan that his favorite thing to do is go to…

A: Budget constraint depicts the combination of two goods that are affordable, given the prices of two…

Q: Ice Cream Utility (IC) Marginal Marginal Cannoli Utility (IC) Utility/ Utility (C) Marginal Marginal…

A: TU is the overall satisfaction that a consumer derives from consuming a certain quantity(Q) of…

Q: What could have caused a change in the budget line from B4 to B1? (a) an increase in the…

A: Correct AnswerThe shift from budget line B4 to B1 indicates a change in the consumer's budget…

Q: To maximize total utility, consumers will always choose the marginal unit of the good that yields…

A: Utility maximisation implied the concept that individuals and firms seek to get the highest…

Q: Demand and Utility Table for Milkshakes Quantity Marginal Total Price Demanded Utility Utility $4 1…

A: The marginal utility can be defined as the change in utility of additional unit of a product. It can…

Q: 3) For Nour doughnuts and muffins are perfect substitutes. Doughnuts are £4 a box and muffins are £3…

A: Dear student, You have asked multiple questions in a single post. I am answering question number 3…

Q: Suppose you go to Trader Joe's to buy fruit for the week. You only like apples (A) and bananas (B)…

A: Preference is over apples and bananas.Income = $11Price of Apples = $1 Price of Bananas = 0.25 We…

Q: Price for good A is $6 and good b is $8. Budget is $36. Good A…

A: Quantity Total Utility marginal utility $MU Quantity Total Utility marginal utility $MU 1 18 18…

Q: ketch a person’s indifference map and budget line for two goods, X on the horizontal axis and Y on…

A: Initially, the optimal bundle is (X*,Y*).The optimal consumption point is E1. (a) A rise in the…

Q: Suppose you had a budget of $20.00 and the prices of a burger and a slice of pizza are $5.00 and…

A: (Q) Suppose you had a budget of $20.00 and the prices of a burger and a slice of pizza are $5.00 and…

Concept explainers

Revealed Preferences and Budget Constraint Analysis

Revealed means “Let Out,” and Preference means “Choice”; Choice Reveals Preference.

Question

**Budgeting for Yarn Purchases with a Gift Card**

Suppose you have a $20 gift card and want to buy blue and red yarn. The utility function from yards of blue (B) and red (R) yarn can be expressed as follows: U(B, R) = 3B + R.

**Cost of Yarn:**
- Red yarn costs $4 per yard.
- Blue yarn costs $4 per yard.

**Task:**
A) Graph the budget constraint and the indifference curves that can be reached. How many yards of each type of yarn will be purchased at these prices with the gift card?

**Instructions:**
1. **Graph the Budget Constraint:**
- Total budget: $20.
- Cost of blue yarn (B) = $4B.
- Cost of red yarn (R) = $4R.
- Budget constraint equation: 4B + 4R = 20.

2. **Plot Indifference Curves:**
- Identify combinations of B and R that provide equal utility.

3. **Determine Optimal Purchase:**
- Find the combination of B and R that maximizes utility given the budget constraint.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The figure below illustrates 3 indifference curves and two budget lines for a student whose budget for online gaming is $10/week. The red line illustrates this student's original budget line. After thanksgiving prices change, the blue (dash-dot) line illustrates the student's new (post-price change) budget line. a) What were the original hourly prices of FortDay and PokemonStop? What are the new prices? b) What is the students optimal bundle at the original prices? How about at the new prices?
can you show how they got this answer
Suppose you had a budget of $20.00 and the prices of a burger and a slice of pizza are $4.00 and $2.00 respectively. What is the marginal utility per dollar spent for the fourth burger?
s) Using the indifference curves, a budget line and a price change, show how we can derive an individual's demand curve for a product..
The prices she's considering are shown in the table below. Calculate the utility for each of the prices in the table. What is the average of the calculated utilities?
Consumer choiceJo buys muffins and cupcakes at a bakery. Jo’s weekly budget for baked goods is $70. The priceof muffins is $1.25. The price of cupcakes is $1.75.a) Write down Jo’s budget constraint: express the quantity of cupcakes as a function of thequantity of muffins.