Chapter5: Markets In Motion And Price Controls
Section: Chapter Questions
Problem 9P
Related questions
Question
![Ques 2.
The domestic demand for wheat is 2DD=1000-25P, and
the export demand is QDE = 500 – 25P.
Draw the domestic, export, and aggregate demand curves for wheat. Label the intercepts and the
kink point.
Ques 3.
#Let's say John allocates his income amounting to $240 between sushi and canned tuna. Let unit
price of sushi be $20 and unit price of canned tuna be $12.
a) Draw the budget line.
b) Now suppose price of canned tuna decreases to $6. Draw the new budget line.
c) Draw two indifference curves. The first should be tangent to the old budget line and the
second should be tangent to the new budget line (tangency points represent the two points of
consumption for John where utility is maximized before and after the price change) such that
canned tuna is an inferior but not a Giffen good. In the figure, show the income, substitution
and total effects.
If](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa1026085-36b8-46c7-b52f-3b22417c84f3%2Fdee4741d-1bbe-4a95-b3c8-1c02d8baedf6%2Fd2tskjb_processed.png&w=3840&q=75)
Transcribed Image Text:Ques 2.
The domestic demand for wheat is 2DD=1000-25P, and
the export demand is QDE = 500 – 25P.
Draw the domestic, export, and aggregate demand curves for wheat. Label the intercepts and the
kink point.
Ques 3.
#Let's say John allocates his income amounting to $240 between sushi and canned tuna. Let unit
price of sushi be $20 and unit price of canned tuna be $12.
a) Draw the budget line.
b) Now suppose price of canned tuna decreases to $6. Draw the new budget line.
c) Draw two indifference curves. The first should be tangent to the old budget line and the
second should be tangent to the new budget line (tangency points represent the two points of
consumption for John where utility is maximized before and after the price change) such that
canned tuna is an inferior but not a Giffen good. In the figure, show the income, substitution
and total effects.
If
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