The following graph illustrates the combination of apples and oranges (point A) that maximizes Yolanda's total utility, given her budget. Suppose the price of oranges doubles, while the price of apples and Yolanda's income both stay the same. 60- 55- 50 Use the line drawing tool to draw a new budget constraint to reflect the increase in the price of oranges. Label this line BC 45 40 Recall the assumptions regarding consumer preferences listed at the beginning of the appendix. 35 830 Assume that consumers are able to rank different combinations of goods and services in terms of how much utility they provide. Also, assume that the consumer's preferences are transitive. 25 a 20 IC Use the three point drawing tool to draw a new indifference curve to refiect the new optimal combination of goods apples and oranges now that the price of oranges has doubled. Label this line 1C 15- 10- Carefully follow the instructions above, and only draw the required objects. 19 5 20 2s 30 s 45 s0 so Quantity of apples What would have to be true to cause the new equilibrium to have more oranges than the original equilibrium point? If oranges are OA an inferior good and the income effect is larger than the substtution effect O B. an inferior good and the income effect is smaller than the substitution effect Oc. a normal good and the income effect is smaller than the substitution effect. OD. a normal good and the income effect is larger than the substitution effect.
The following graph illustrates the combination of apples and oranges (point A) that maximizes Yolanda's total utility, given her budget. Suppose the price of oranges doubles, while the price of apples and Yolanda's income both stay the same. 60- 55- 50 Use the line drawing tool to draw a new budget constraint to reflect the increase in the price of oranges. Label this line BC 45 40 Recall the assumptions regarding consumer preferences listed at the beginning of the appendix. 35 830 Assume that consumers are able to rank different combinations of goods and services in terms of how much utility they provide. Also, assume that the consumer's preferences are transitive. 25 a 20 IC Use the three point drawing tool to draw a new indifference curve to refiect the new optimal combination of goods apples and oranges now that the price of oranges has doubled. Label this line 1C 15- 10- Carefully follow the instructions above, and only draw the required objects. 19 5 20 2s 30 s 45 s0 so Quantity of apples What would have to be true to cause the new equilibrium to have more oranges than the original equilibrium point? If oranges are OA an inferior good and the income effect is larger than the substtution effect O B. an inferior good and the income effect is smaller than the substitution effect Oc. a normal good and the income effect is smaller than the substitution effect. OD. a normal good and the income effect is larger than the substitution effect.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph lustrates the combination of apples and oranges (point A) that
maximizes Yolanda's total utility, given her budget. Suppose the price of oranges
doubles, while the price of apples and Yolanda's income both stay the same.
55
Use the line drawing tool to drawa new budget constraint to reflect the increase in
the price of oranges. Label this line BC
50
45-
Recal the assumptions regarding consumer preferences listed at the beginning of
the appendix
40
35
8 30
Assume that consumers are able to rank difforent combinations of goods and
services in terms of how much utility they provide. Also, assume that the consumer's
preferences are transitive.
A
25
20-
IC
Use the three point drawing tool to draw a new indifference curve to refiect the new
optimal combination of goods apples and oranges now that the price of oranges has
doubled. Label this line 1C
15-
10-
Carefully follow the instructions above, and only draw the required objects.
19 s 20 2 30 3s 40 45 so 5s 60
Quantity of apples
What would have to be true to cause the new equilibrium to have more oranges than
the original equilibrium point? If oranges are
OA an inferior good and the income effect is larger than the substitution effect
O B. an inferior good and the income effect is smaller than the substtution effect
Oc a normal good and the income effect is smaller than the substitution effect
O D. a normal good and the incomo effect is larger than the substitution effect
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