Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 21.2, Problem 2QQ
To determine
The indifference curves and the properties of indifference curve.
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Draw hypothetical consumer’s indifference curves for Soft-drink and Pizza. Describe and explain four properties of these indifference curves.
Illustrate and explain how consumer equilibrium is achieved using the indifference curve?Discuss how the demand elasticity of a product changes? Give examples.
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.
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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- Draw a consumer’s indifference curves for pizza and coke. Describe and explainproperties of these indifference curves.arrow_forwardJerry spends his entire budget on bread and gasoline. His preferences are complete, transitive, monotonic, and convex. For Jerry, bread is an inferior good that follows the law of demand. Moreover, his cross-price elasticity of demand for gasoline with respect to the price of bread is negative. Suppose the price of bread increases, all else constant. a. Create a chart to show the total, income, and substitution effects on bread and gasoline of the increase in the price of bread. b. Use budget lines and indifference curves to graphically illustrate the three effects. Be sure to label each effect on your graph (or through the chart from part a) and plot bread on the x-axis and gasoline on the y-axisarrow_forward1. Arya has an income of $150 per month. She spends on two goods: Burgers and Colas. The price of a burger is $5 and the price of a cola is $2. a. Using the information above, derive Arya's budget line equation with the quantity of cola on the left side. b. Arya's utility is maximized when 20 burgers and 40 colas are consumed. Draw an indifference curve along with your budget line (with quantity of burgers on the x-axis) to show Arya's best affordable point. c. Suppose, income falls from $150 to $100. Show how your graph in part (b) will change? d. Suppose, price of burger rises from $5 to $10. Show how your graph in part (b) will change?arrow_forward
- Sandra consumes water and apples. Water is an inferior good to her, apples are a normal good to her. Which effect does a rising price for water have on her demand for both goods? Conduct a graphical indifference analysis and explain in detail. Put water on the x-axis of your diagram. Show SE, IE and TE for both goods.arrow_forwardConsider two different pairs of goods: a. Sunscreen and bug spray b. Hot dogs and hamburgers Which pair of goods are most likely complements? Which pair of goods are most likely substitutes? Which pair of goods most likely have fairly straight indifference curves? Which pair of goods most likely have very bowed indifference curves? Why? In which case will a consumer respond more to a change in the relative price of the two goods?arrow_forward7. In the image with two indifference curves... hamburgers and soft drinks are both goods hamburgers are a good, but soft drinks are a bad hamburgers and soft drinks are both bads hamburgers are a bad, but soft drinks are a goodarrow_forward
- 8. Sara’s income is $12 a week. The price of popcorn is $3 a bag and the price of cola is $1.50 a can. The figure below shows Sara’s indifference curves for popcorn and cola. In the picture popcorn is on y-axis and cola on x-axis. a. What quantity of popcorn and cola does Sara buy to maximize her well being? What is Sara’s marginal rate of substitution at the point at which she consumes? b. Suppose that the price of cola rises from $1.50 to $3.00 a can while the price of popcorn and Sara’s income remain the same. What quantities of cola and popcorn does Sara now buy? c. What are two points on Sara’s demand curve for cola? Draw Sara’s demand curve.arrow_forwardWould you expect marginal utility torise or fall with additional consumption of a good? Why?arrow_forwardPage of 3 > Due November 1, 2 Press Esc to exit full screen A. Jack enjoys a cup of cappuccino every morning, which is made with equal parts of steamed milk (m) and espresso(e). Suppose Jack's utility function U(m, e) = min(m, e). Graph Jack's indifference curves when U = 4 and U = 8. B. Leslie buys 2 goods: z and y. His utility function is U(z,y) = 5x+3y. 1. Plot this consumer's indifference curves when U = 15 and U = 20. What is the shape of Leslie's indifference curves? 3. For Leslie, how are these two goods related? C. Leslie's friend Tim has a different utility function for the same goods U(x, y) = √zy. 1. Plot this consumer's indifference curves when U = 15 and Ū = 20. 2. What is the shape of Tim's indifference curves? D. A consumer's utility function for goods 2 and y is U(z,y) = x+2y. 2. 1. Calculate the consumer's marginal utility for each good at (2,2) (Hint: marginal utility represents the amount of utility the consumer gains by consuming one more unit of this good. You can…arrow_forward
- 1. Good X is a Giffen good (a good that violates the law of demand). Suppose that the price of Good X increases. Explain the interaction between the substitution effect and incoming effect of this price increase in a diagram with three budget lines and two indifference curves.arrow_forwardThe following table shows the total utility gained from the consumption ofFanta Lemon in a week.left is quantity and right is total utility 1-20 2-35 3-45 4-53 5-58 6-58 7-481. Calculate the marginal utility. What do you observe?2. Sketch the total utility and marginal utility curves.3. If the price of Fanta Lemon increases from Rs.8 to Rs.10, how will itaffect its consumption?Explain your answer using the data above.arrow_forwardSolve the following task on paper, sign your solution and upload your result. Maria consumes oranges and bananas. Both are normal goods to her. Which effect does a falling price for oranges have on her demand for both goods? Conduct a graphical indifference analysis and explain in detail. Put oranges on the X-axis of your diagram. Show SE, IE, and TE for both goods.arrow_forward
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