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 indifference curve it can reach. d. Now consider the effect of the quota on other types of households that have the same income but different preferences for toilet paper. Which households will be affected and made worse off from the quota? Why? Which households will not be indifferent? Why?
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 indifference curve it can reach. d. Now consider the effect of the quota on other types of households that have the same income but different preferences for toilet paper. Which households will be affected and made worse off from the quota? Why? Which households will not be indifferent? Why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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 indifference curve it can reach.
d.
Now consider the effect of the quota on other types of households that have the same
income but different preferences for toilet paper. Which households will be affected and
made worse off from the quota? Why? Which households will not be indifferent? Why?
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