Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 21.1, Problem 1QQ
To determine
The budget constraint of a person and its slope.
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What 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?
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.
draw the budget constraint for a person with income of $ 1000 if the price of pepsi is $5 and the price of pizza is $10 what is the slop of their budget constraintope of their budget
Chapter 21 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QR
Ch. 21 - Prob. 7QRCh. 21 - Prob. 1QCMCCh. 21 - Prob. 2QCMCCh. 21 - Prob. 3QCMCCh. 21 - Prob. 4QCMCCh. 21 - Prob. 5QCMCCh. 21 - Prob. 6QCMCCh. 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. 12PACh. 21 - Prob. 13PA
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- The graph shows the budget line for a consumer who only buys cookies and magazines. If the consumer's income is $20, what is the price of a cookie? Cookies (number per week) 24 20 16 8 0 2 4 6 8 10 12 Magazines (number per week)arrow_forwardA 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.arrow_forwarddraw 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_forward
- Draw a budget constraint and indifference curve for Pepsi and Pizza on the same graph. Show the optimum point and explain what it represents. Show what happens to the budget constraint and the optimum when price of pizza rises? Decompose the change in part 2 into income and substitution effect. Derive the demand curve from this price change.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_forwardQuestion 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_forward
- Answer these all questions showing in the image.arrow_forwardIf a household has an income of $50 and buys only milk at $3 each unit and honey at $6 each unit, what is the household’s budget equation? Explain your answer.arrow_forwardAlex distributes his monthly income of $600 between two goods, movies and food. By spending his entire income on movies, he can enjoy a maximum of 20 movies. On the other hand, by spending his entire income on food he can consume a total of 60 units of food. Assume that food consumption is measured along the horizontal axis and the consumption of movies is measured on the vertical axis. Calculate the slope of Alex's budget line when the price of food increases to $20 while the price of movie remains unchanged. -2/3 - 1.5 -2 -3/4arrow_forward
- suppose 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_forwardQuestion 4 A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per bottle. Draw the consumer’s budget constraint (put pillow on the horizontal axis). What is the slope of this budget constraint? Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both pillows and soda are normal goods. The price of pillows rises from $35 to $40 per pillow, while the price of sodas is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects. Under what circumstance(s) if any can an increase in the price of pillows induce a consumer to buy more of that good? Explain. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.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_forward
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