Suppose there are only two goods in the economy: Yo-yos and Marbles. Bob only cares about his consumption of Yo-yos; the more Yo-yos he has the happier he is, regardless of his consumption of Marbles. In contrast, Lucy only cares about his consumption of Marbles; the more Marbles she has the happier she is, regardless of her consumption of Yo-yos. (a) Draw Bob's indifference curves, putting Yo-yos in the x-axis and Marbles in the y-axis. (b) Draw Lucy's indifference curves, putting Yo-yos in the x-axis and Marbles in the y-axis. (c) Do Bob's and Lucy's preferences comply with the property of diminishing marginal rate of substitution?

Suppose there are only two goods in the economy: Yo-yos and Marbles. Bob only cares about his consumption of Yo-yos; the more Yo-yos he has the happier he is, regardless of his consumption of Marbles. In contrast, Lucy only cares about his consumption of Marbles; the more Marbles she has the happier she is, regardless of her consumption of Yo-yos. (a) Draw Bob's indifference curves, putting Yo-yos in the x-axis and Marbles in the y-axis. (b) Draw Lucy's indifference curves, putting Yo-yos in the x-axis and Marbles in the y-axis. (c) Do Bob's and Lucy's preferences comply with the property of diminishing marginal rate of substitution?

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

Paul loves hot drinks, and he has a part of his weekly budget earmarked for buying them. In the diagram below, you can find three examples IC1, IC2 and IC3 for indifference curves that represent Paul's preferences for tea and coffee, and three examples X, Y and Z for specific bundles of weekly tea and coffee consumption.
Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. wwwwwww a) In a graph, draw total utility as a function of number of toothpaste tubes, assuming that Andrea buys 1 tooth brush. b) How many tubes will Andrea buy if he wants to maximise consumer surplus, assuming that Andrea can buy any amount of tooth brushes? What is Andrea's total consumer surplus? c) How many tubes will he buy if the current price is £0.50 per tube? d) Find Andrea's…
7) A consumer has to choose the optimal amount of cheese and crackers to purchase. He or she has drawn his or her budget constraint (BC) and indifference curves on a graph with the amount of cheese (in ounces) on the horizontal axis and the amount of crackers (in packages) on the vertical axis. Which of the following statements is true if the price of crackers declines? The BC shifts to the left (down). The BC shifts to the right (up). The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a lower point. The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a higher point.
Yungin always gets twice as much satisfaction from an extra burger as he does from an extra Boost juice. Draw (for yourself) three indifference curves for him on a graph - passing through the bundles (2 juices, O burgers), (4 juices, O burgers) and (5 juices, O burgers) respectively. Qburgers 3 2 5 Qjuice The graph above includes two budget lines with different slopes to help you answer the following question. Which conclusions can you draw about Yunqin's utility maximising choices? Select all that applies. 01 2 3 Yungin would never consume both burgers and juice at the same time Yungin always consumes only juice if Yungin' budget line is flatter than his indifference curves, then he consumes only juice if the ratio of the price of burger to the price of juice is smaller than 2, then Yunqin consumes only burgers
Lisa consumes only two goods, pizzas and burritos. In equilibrium, her marginal utility per slice of pizza is 10 and her marginal utility per burrito is 8. Instructions: Enter your answer rounded to two decimal places. If a slice of pizza costs $3, then the price of a burrito must be $
3. You have an income of $24 per week and the only two goods you consume are apples (x1) and orange juice (x2). The price per apple is $4 and the price of a bottle of orange juice is $3. Suppose that your weekly optimal consumption bundle is 4 bottles of orange juice and 3 apples . a. Illustrate this in a graph using indifference curves and budget lines. Be sure to fully label the graph. b. Write down the conditions for utility maximization and relate this to the graph that you drew. c. Now suppose that the price of apples falls to $2, and I take enough money away from you such that you are just as well off as you were before, will you buy more of fewer bottles of orange juice? Explain why or why not in words and with a graph. (Hint: think about income and substitution effects
Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. a) In a graph, draw total utility as a function of number of toothpaste tubes, assuming that Andrea buys 1 tooth brush. b) How many tubes will Andrea buy if he wants to maximise consumer surplus, assuming that Andrea can buy any amount of tooth brushes? What is Andrea's total consumer surplus? c) How many tubes will he buy if the current price is £0.50 per tube? e d) Find Andrea's…
Suppose that the only items you consume are bread and wine. If the price of bread were to increase tomorrow, and if simultaneously your income were to increase by just enough so that you were equally as happy tomorrow as today, what would happen to the level of your consumption of bread ? Illustrate your answer with indifference curves
I MUST DRAW THE BUDGET CONSTRAINT AND INDIFFERENCE CURVE