EBK PRINCIPLES OF ECONOMICS
8th Edition
ISBN: 8220103600453
Author: Mankiw
Publisher: CENGAGE L
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Question
Chapter 21, Problem 1QR
To determine
The budget constraint of the consumer.
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A consumer has income of $3,000. Wine costs $3 per glass, and cheese costs $6 per pound. Make a graph. Draw the consumer’s budget constraint with wine on the vertical axis. Make sure to label the axes.
A consumer has income of $3,000. Fresh Juice costs $3 per glass, and cheese costs $6 per pound.
(a) Draw the consumer's budget constraint (put cheese on the horizontal axis). What is the slope of this budget constraint?
(b) The price of cheese rises from $6 to $10 per pound, while the price of Fresh Juice remains $3 per glass. For a consumer with constant income of $3,000, show what happens to consumption of Fresh Juice and cheese (assuming both are normal goods). Decompose the change into income and substitution effects. Be sure to clearly mark all relevant information in your diagram.
Answer these all questions showing in the image.
Chapter 21 Solutions
EBK PRINCIPLES OF ECONOMICS
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1CQQCh. 21 - Prob. 2CQQCh. 21 - Prob. 3CQQCh. 21 - Prob. 4CQQCh. 21 - Prob. 5CQQCh. 21 - Prob. 6CQQ
Ch. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QRCh. 21 - Prob. 7QRCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PA
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- Jessie is attempting to draw her budget constraint for purchasing cookies and strawberries. At a maximum, she could consume 500 strawberries; she labels this point on the vertical axis of her budget constraint. At a maximum, she could consume 200 cookies; she labels this point on her graph. If the price of a cookie is $0.50 and her budget is $100, what is the price of a strawberry?arrow_forwardWhat is a budget constraint? A consumer has an income of $3000. Soda costs $3 per liter and cheese costs $6 per pound. Draw the consumer's budget constriaint with soda on the vertical axis. What is the slope of the budget constraint?arrow_forwardMarie has a weekly budget of $24, which she likes to spend on magazines and pies. Calculate: a) If the price of a magazine is $4 each, what is the maximum number of magazines she could buy in a week? b) If the price of a pie is $12, what is the maximum number of pies she could buy in a week? c) Draw Marie’s budget constraint with pies on the horizontal axis and magazines on the vertical axis. What is the slope of the budget constraint? d) What is Marie’s opportunity cost of purchasing a pie? NOTE: To answer this question simply work your answer in a piece of paper, take a photo of it and upload the file. Remember that this is a problem solving question, hence you must show your work!arrow_forward
- draw a budget constraint and indifference curves for pizza and pepsi .show what happens to budget constraint and consumer's optimum when the price of pizza rises .in your diagram, decompose the change into an income effect and a substitution effectarrow_forwardJessie has a budget of $50 and is attempting to draw her budget constraint for purchasing cookies and strawberries. At a maximum, she could consume 100 strawberries; she labels this point on the vertical axis of her budget constraint. If the slope of her budget constraint is -4, what is the price of a cookie?arrow_forwardIf Joe decides to allocate his entire weekly allowance between energy drinks and coffee, he could afford 9 energy drinks and 3 cups of coffee, or 6 cups of coffee and 2 energy drinks. Suppose a cup of coffee costs £2.80. a) Calculate the price of an energy drink and Joe's weekly allowance. Write down Joe's budget equation and draw the corresponding budget line. Mark the two consumption bundles mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. b) Discuss how Joe's budget set would change if his allowance was reduced by £5.20 a week. Show the relevant changes graphically. How should the price of coffee change so that Joe could still afford to buy 6 cups of coffee and 2 energy drinks? c) Discuss how Joe's budget constraint would change if the government subsidised consumption of coffee by £0.50 per cup of coffee.arrow_forward
- Question No. 5| Hafidh's income is $200 a month. The price of watch is $25 a show, and the price of a Jeans is $15. a) Calculate the equation for Hafidh's budget line b) Draw a graph of Hafidh's budget line with the quantity of Watches on the x-axis. c) If Hafidh's income increased from $200 to 350$. Explain and show how Hafidh's budget line changes with watches on the x-axis.arrow_forwardImagine a consumer has a monthly income of $200. They want to spend this income on two goods: books and movies. The price of a book is $10, and the price of a movie ticket is $20. The budget constraint equation represents all the combinations of books (B) and movies (M)that the consumer can purchase with their income. The equation is: 10B + 20M = 200 Where: (10) is the price of one book. (B) is the quantity of books. (20) is the price of one movie ticket. (M) is the quantity of movie tickets. (200) is the total income. What is the slope of the budget line? Question 26Answer a. 2.0 b. 0.75 c. 1.5 d. 0.5arrow_forwardsuppose you have a fixed income of $3000 per month and you want to allocate your budget between two products: X and Y. Let's say the price of good x is $10 per unit, and the price of good y is $20 per unit. What is the budget constraint? Draw it on a graph and label the intercepts and the slope.arrow_forward
- Suppose you have a budget of 30 to spend on two goods: pizzas and burgers. Each pizza is $5 while each burger is $10. Suppose you already purchased 6 pizzas. What is the maximum number of burgers that you can buy with the remaining funds in your budget?arrow_forwardPeter loves spicy food. He consumes both Laoganma chili crisp and Texas Pete hot sauce. His annual budget curve maps from (20 bottles of Laoganma, 0 cups of Texas Pete) to (0 bottles of Laoganma, 24 bottles of Texas Pete). a) Draw his budget constraint. Express the price of Texas Pete, in terms relative to the price of Laoganma. b) Given this set up, would Peter ever consume at the following points of (#bottles of Laoganma, #bottles of Texas Pete)? Why/why not? If we would consume at this point, draw an indifference curve that would justify this decision.i) (12, 12) ii) (6, 15) iii) (6, 6) iv) (12, 10) c) Imagine that Peter consumes 4 bottles of Laoganma. How many bottles of Texas Pete will he consume?d) Now imagine that the price of Texas Pete doubles. Draw the new budget constraint in Laoganma / Texas Pete space. e) Assume Peter goes from the consumption point found in part c of this question to a new point where he consumes 5 bottles of Laoganma to some new consumption point defined…arrow_forwardRaymond consumes meatloaves and pineapples. He has decided that hismonthly budget will be $1500. Suppose that one meatloaf costs $375, while onepineapple costs $150.i. What is the expression for Raymond’s budget constraint? ii. Draw a graph of Raymond’s budget line (meatloaf on the y axis).arrow_forward
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