Refer to the indifference curve/budget line diagram below in Figure 4 for Jeremiah. He has $300 in income and initially faces prices of the price of X (Px = $1) and the price of Y (Py = $3). Given this information, Jeremiah maximized his utility at point a when BL intercepts/tangents to IC. If the price of good x rises to $3 (Px), how much additional income would Jeremiah need, in order to be able to attain his original level of utility given the new prices? y 150BLSE 100 ICI IC2 BL1 BL2 50 100 300 Figure 4 O a. $450. O b. $150. О с. There is insufficient information to determine the additional income needed. O d. $300.

Refer to the indifference curve/budget line diagram below in Figure 4 for Jeremiah. He has $300 in income and initially faces prices of the price of X (Px = $1) and the price of Y (Py = $3). Given this information, Jeremiah maximized his utility at point a when BL intercepts/tangents to IC. If the price of good x rises to $3 (Px), how much additional income would Jeremiah need, in order to be able to attain his original level of utility given the new prices? y 150BLSE 100 ICI IC2 BL1 BL2 50 100 300 Figure 4 O a. $450. O b. $150. О с. There is insufficient information to determine the additional income needed. O d. $300.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

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?
Riley has $6 to spend on ramen and apps for their phone. The price of a bowl of ramen is $2, and the price of an app is $1. Riley's preferences for ramen and apps are represented by the indifference curves on the next page. a. Determine which line (L1, L2, L3, L4, or L5) represents Riley's budget constraint. b. Find the utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of ramen Riley will buy. Suppose now that the price of a bowl of ramen is discounted for students to $1 per bowl. c. Determine which line (L1, L2, L3, L4, or L5) represents Riley's new budget constraint. d. Find the new utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine how many bowls of Ramen Riley will now buy. e. Find the size and direction (positive or negative) of the substitution effect. As part of your answer, state the starting quantity and ending quantity of bowls of ramen that represent this effect. f. Find the size and direction (positive or negative) of…
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?
Ben gets utility from apples and bananas such that U(A,B)=A+2B. If the price of bananas is $2, then Ben's ordinary demand curve for apples in the (x1, p1) plane is zero for pA>$2 and then downward sloping for pA$0.50 and then downward sloping for pA$0.50 and then vertical for pA$1 and then vertical for pA$4 and then downward sloping for pA$4 and then vertical for pA<$4.00
Consider a consumer with M = $120 to spend (income) and faces prices PX = $15 and PY =$5 for goods X and Y. Her utility function is U(X, Y) = X1/2 + Y1/2.a Carefully. express the consumer’s choice problem, using the given information (this is whereyou write out the max operator, the choice variables, the objective function, and the budget constraint). b. Compute the absolute value of the consumer’s marginal rate of substitution, and inspect it todetermine the shape of the consumer’s indifference curves: C-shaped, linear, )-shaped, or some other shape.To show your work, neatly use the arrow argument, increasing X (↑) and decreasing Y (↓) to see whether|MRS(X, Y)| is diminishing along an indifference curve. c. If the indifference curves are C-shaped write out the budget line and the equal slopes conditionthat characterize an interior solution to the consumer’s choice problem. Use the particulars for the givenconsumer. Solve these conditions to find the interior solution. On the other…
George has a fixed income and can afford at most 7 units of X if he spends his entire income on X. Alternatively, if he spends all his income on Y, he can afford at most 6 units of Y. Draw George's budget line and an indifference curve such that George chooses to buy 4 pieces of X. Martha has the same income and faces the same prices, yet she chooses to buy 2 pieces of X. In equilibrium, what is George's subjective value of X in terms of Y? What is Martha's? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
When plotted Sarah's indifference curve for coffee and tea reveals parallel indifference curves that always have a slope of -1. Suppose that Sarah's budget constraint is 20 -1.5C+1.0T where C is the quantity of coffee and T is tea. If Sarah wants to maximize utility, she will buy: a) equal amount of coffee and tea b) coffee only c) tea only d) more coffee than tea e) a combination of coffee and tea cannot be determined from the information given
Mary has $100 to spend on goods X and Y. The price of Y is pY = $2.50. Mary has well-behaved preferences and two of her indifference curves are shown on the above graph along with some tangent points. don't need to use any utility functions or do any complicated math. 1.Suppose the price of X is $1.25. On the graph above, label Mary’s budget line as (BLA) and label Mary’s optimal consumption bundle as bundle A.2.Now suppose the price of X rises to $5. On the graph above, label Mary’s budget line as (BLB) and label Mary’s optimal consumption bundle as bundle B.3.On a separate graph, with X on the horizontal axis and PX (the price of good X) on the vertical axis, construct Mary’s demand curve for good X, carefully showing two points on Mary’s demand curve corresponding to the work you have done above.