Your classmate tells you that he is indifferent between the following bundles: (A) three soft drinks and two hamburgers or (B) two soft drinks and three hamburgers. 1.) Use the point drawing tool to plot these bundles of goods in the graph on the right. Label the points 'A' and 'B,' respectively. 2.) Use the three-point curve drawing tool to draw a smooth indifference curve that passes through the above points. Carefully follow the instructions above and only draw the required objects. C Hamburgers 8 7- 6- 2- 1- 0- 0 2 3 4 Soft drinks 5 6 7 8

Your classmate tells you that he is indifferent between the following bundles: (A) three soft drinks and two hamburgers or (B) two soft drinks and three hamburgers. 1.) Use the point drawing tool to plot these bundles of goods in the graph on the right. Label the points 'A' and 'B,' respectively. 2.) Use the three-point curve drawing tool to draw a smooth indifference curve that passes through the above points. Carefully follow the instructions above and only draw the required objects. C Hamburgers 8 7- 6- 2- 1- 0- 0 2 3 4 Soft drinks 5 6 7 8

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Marginal Rate of Technical Substitution

MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.

Preferences and Utility Analysis

Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.

Question

Your classmate tells you that he is indifferent between the
following bundles:
(A) three soft drinks and two hamburgers or
(B) two soft drinks and three hamburgers.
1.) Use the point drawing tool to plot these bundles of goods in the
graph on the right. Label the points 'A' and 'B,' respectively.
2.) Use the three-point curve drawing tool to draw a smooth
indifference curve that passes through the above points.
Carefully follow the instructions above and only draw the required
objects.
←
Hamburgers
8
7
6-
2-
L
1
to
0-
ta
2
3
4
Soft drinks
+5
-6
7

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Michael and Kelly consume food and clothing. In particular, Michael currently consumes 23 units of food and 19 units of clothing and Kelly currently consumes 17 units of food and 21 units of clothing. At these levels of consumption, Michael's MRS of food for clothing is 0.40 and Kelly's MRS of food for clothing is 2.50. Illustrate with an Edgeworth box. 1.) Using the three-point curved line drawing tool, draw an indifference curve for Michael when consuming 23 units of food and 19 units of clothing. Label this curve UM. 2.) Using the three-point curved line drawing tool, draw an indifference curve for Kelly when consuming 17 units of food and 21 units of clothing. Label this curve Uk. Carefully follow the instructions above, and only draw the required objects. Next, fill in the missing information in the following table. For simplicity, assume the consumers have the option of trading one unit of food (F) for one unit of clothing (C). Fill in the following table. (Enter your responses…
Show full answers to a) b) & c)
Abby likes tangerines and oranges. For every 4 tangerines, Abby is equally happy to consume 2 oranges instead. Let x be the number of tangerines, and y be the number of oranges. (a) Graph Abby's indifference curves. Make sure to mark the direction of the preferred bundles. (b) Write down an utility function that represents Abby's preferences. (c) Write down another utility function different from your previous answer but also represents Abby's preferences. (d) Does v(x, y) = x + y represent Abby's preferences? (e) What is Abby's marginal rate of substitution? (f) Suppose that px = 1, py = 1, and Abby has Y = 20. Compute Abby's optimal consumption bundle.
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Emily is a utility maximizer. Her income is $100, which she can spend on cafeteria meals and on notepads. Each meal costs $5 and each notepad costs $2. At these prices Emily chooses to buy 16 cafeteria meals and 10 notepads. a) Draw a diagram that shows Emily’s choice using an indifference curve and her budget line, placing notepads on the vertical axis and cafeteria meals on the horizontal axis. Label the indifference curve, I1, and the budget line BL1. Make sure you calculate the endpoints of the budget constraint. b) The price of notepads falls to $1; the price of cafeteria meals remains the same. On the same diagram, draw Emily’s budget line with the new prices and label it BL2. c) Lastly, Emily’s income falls to $90. On the same diagram, draw his budget line with this income and the new prices and label it BL3. Is she worse off, better off, or equally as well off with these new prices and lower income than compared to the original prices and higher income?