10. Deriving demand from an indifference mapAlyssa lives in Dallas and enjoys drinking lattes and eating scones. The price of a latte is held constant at $4 throughout this problem.On the following graph, the purple curves (I and I2) represent two of Alyssa's indifference curves. The lines BC, and BC2 show two budgetconstraints. Points X and Y show Alyssa's optimum consumption bundles subject to these budget constraints.18161412Y108BO+0 248.10141618SCONESGiven the preceding graph and knowing the price of a latte is $4, Alyssa's available income for lattes and scones is $2012202)LATTES Given the preceding graph and knowing the price of a latte is $4, Alyssa's available income for lattes and scones is $Using the income amount you just computed, complete the following table by finding the price of a scone when BC1 represents Alyssa's budgetconstraint and when BC2 represents her budget constraint. Then indicate the quantity of scones consumed in each of those scenarios.PriceConsumptionWhen Alyssa's budget constraint is...(Dollars per scone)(Scones)BC1BC2Given the price-quantity combinations from the preceding table, use the blue line (circle symbol) to plot Alyssa's demand for scones on the followinggraph.Hint: Assume that Alyssa's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Thenplace the blue line on the following graph so that it passes through these two points.109.Demand8.721+481012141618QUANTITY (Scones)204.3.PRICE (Dollars per scone)

Lattes is measured on Y-axis Scones is measured on X-axis. --------------------- Y-axis intercept of…

Answered: Using the income amount you just…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Bill is on a low-carbohydrate diet. He can eat only three foods: Rice Krispies, cottage cheese, and popcorn. The marginal utilities for each food are tabulated below. Bill is allowed only 167 grams of carbohydrates daily. Rice Krispies, cottage cheese, and popcorn provide 25, 6, and 10 grams of carbohydrates per cup, respectively. Referring to the accompanying table, respond to the following questions: Please check the image provided for the table.
Derive and plot Madeline's demand curve for Coke if she views Coke and Pepsi as perfect substitutes. (Hint: The quantity of Coke consumed where the budget line hits the Coke axis is Y/Pc, where pc is the price of Coke, pp is the price of Pepsi, and Y is income.) Use the 3-point curved line drawing tool to draw Madeline's demand curve for Coke. To simplify the analysis, assume that if the price of Coke and the price of Pepsi are equal, then Madeline, though indifferent between the two, only consumes Coke. Label this curve 'Demand'. Carefully follow the instructions above, and only draw the required objects. C Price/can of Coke Pp Y Pc Coke, Cans per year
The graph below shows David’s preferences for leisure and consumption. Draw three budget constraints in the graph below. One if David’s wage is $10 per hour (BC1), another if his wage is $20 per hour (BC2) and a third for if his wage is $30 per hour (BC3). Show the optimal combination of leisure and consumption for each of the three budget constraints. Label the optimal amount of Leisure, L1, L2 & L3, and label the optimal amounts of consumption C1, C2 & C3.
The following figure shows the demand curve of commodity x (for a level of income W and the prices of the other commodities constant). The income effect due to an increase in the price of commodity x from 10 to 11 is: Positive Cannot be determined from the graph. Negative Dominated by the substitution effect Could be positive or negative.
Mia is a registered nurse. She has 18 hours per day to devote to labor or leisure, and has $20 nonlabor income per day. She is paid $10 per hour for the first 8 hours of work and $15 per hour for overtime (for hours worked over 8 hours). Mia's preferences are represented by U(C, R) = CR utility function, where Cis the amount of dollars she spends on consumer goods and R be the number of hours of leisure that she chooses. Question 1 Part a Assuming she can work as many hours per day as she wishes, draw Mia's indif- ference curves, budget constraints and solve for her optimal consumption and leisure choices. Question 1 Part b Suppose that Mia's wage rate rises to $11 an hour for the first 8 hours. She is still paid $15 per hour for overtime. Again, find her optimal choice. Decompose the total change in demand due to a price change into a substitution effect, ordinary income effect and endowment income effect and graphically demonstrate each effect.

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