Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 3, Problem 11E
To determine
Identify whether the statement is true or false.
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Suppose that Turkish consumers pay twice as much for oranges as they pay for apples, whereas Azerbaijani consumers pay half as much for oranges as they pay for apples.Assuming that consumers maximize their utility, which country's consumers have a higher marginal rate of substitution of oranges for apples? Explain your answer.
Consumers in Georgia pay twice as much for avocados as they do for peaches. However, avocados and peaches are the same prices in California. If consumers in both states maximize utility, will the marginal rate of substitution of peaches for avocados be the same for consumers in both states? If not, which will be higher?
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Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
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What is the concept of diminishing marginal utility of consumers? How consumer use Marginal Rate of Substitution to reach consumer equilibrium level where MRTS = Px/Py?
Chapter 3 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
Ch. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Prob. 8ECh. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 16ECh. 3 - Prob. 17E
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- Suppose that Boston consumers pay twice as much for avocados as for tangerines, whereas San Diego consumers pay half as much for avocados as for tangerines. Assuming that consumers maximize their utility, which city's consumers have a higher marginal rate of substitution of avocados for tangerines? Explain your answer.arrow_forwardWhat is the law of diminishing marginal utility for consumers, what is the learning curve of a producer? It seems that as the producer becomes more efficient at producing their product; the consumer tends to have less and less satisfaction from consuming one additional unit of the producer's product. Is this true (think in terms of only one producer and consumer)? Explain your answer.arrow_forwardSuppose that Mr. Umais spends his entire income on good X and Y. The marginal utility of each commodity is recorded in the table below. If the price of X is Rs. 100 and price of Y is 500 and mr. Umais has an income of Rs. 1000 per month. How many units of each good should he purchase? Units of X and Y MU x MU y 1 20 50 2 18 45 3 16 40 4 13 35 5 10 30 6 6 25 7 4 20 8 2 15 a. (X, Y) = (5, 0) b. (X, Y) = (5, 5) c. (X, Y) = (0, 5) d. cannot be determinedarrow_forward
- It is common for supermarkets to carry both generic (store-label) and brand-name (producer-label) varieties of sugar and other products. Many consumers view these products as perfect substitutes, meaning that consumers are always willing to substitute a constant proportion of the store brand for the producer brand. Consider a consumer who is always willing to substitute 4 pounds of a generic store brand for 2 pounds of a brand-name sugar. Do these preferences exhibit a diminishing marginal rate of substitution? Assume that this consumer has $24 of income to spend on sugar, and the price of store-brand sugar is $1 per pound and the price of producer-brand sugar is $3 per pound. How much of each type of sugar will be purchased? How would your answer change if the price of store-brand sugar was $2 per pound and the price of producer-brand sugar was $3 per pound?arrow_forwardAll goods have diminishing marginal utility, but for some goods (or activities), marginal utility falls quickly as you consume more, while for others, marginal utility falls slowly. Can you think of examples of goods that you continue to enjoy a great deal as your consumption increases? Can you think of goods for which your marginal utility decreases rapidly?arrow_forwardexplain how utility analysis leads to the law of demand.arrow_forward
- If we consume an additional unit of goods when utility is maximum, the utility we get from this additional unit is (positive, negative or zero)? Choose one why?arrow_forwardSuppose your classmate Hilary loves to eat dessert-so much so that she allocates her entire weekly budget to apple crisp and pie. The price of one bowl of apple crisp is $1.25, and the price of a piece of coconut crème pie is $5.00. At her current level of consumption, Hilary's marginal rate of substitution (MRS) of apple crisp for pie is 4. In other words, Hilary is willing to sacrifice four bowls of apple crisp for one piece of pie per week. Does Hilary's current consumption bundle maximize her utility? That is, does it make her as well off as possible? If not, how should she change it to maximize her utility? O Hilary could increase her utility by buying more apple crisp and less pie per week. Hilary could increase her utility by buying less apple crisp and more pie per week. O Hilary's current bundle maximizes her utility, and she should keep it unchanged.arrow_forwardConsider two normal goods that are imperfect substitutes. Draw a diagram with Good 1 on the horizontal axis to illustrate the effect of a decrease in the price of Good 1 on the consumption of both Good 1 and Good 2. Does the substitution effect reinforce the income effect for both goods? Why or why not? Explain.arrow_forward
- You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the following table. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X.arrow_forwardTwo students, Nick and Sofia, are discussing normal and inferior goods. Nick says that if Frodo buys more beer when the price of beer goes up, then beer must be an inferior good for Frodo. If, on the other hand, he buys less beer when the price of beer goes up, then beer must be a normal good for Frodo. Sofia disagrees: "Normal and inferior goods are about income changes, not price changes. Therefore, we do not have enough information: beer could be an inferior or normal good in either of these cases." Do you agree or disagree? Carefully explain your point of view. Support your argument with graphs of income, substitution and total effects (please put beer on the horizontal axis and the other goods on the vertical axis). Please assume that Frodo's preferences over beer and other goods are strictly convex and satisfy "more is better" assumption.arrow_forwardSuppose that Dale consumes only coffee and cheese, both of which have diminishing marginal utility. For each of the following cases, determine whether Dale should 1Consume more coffee and less cheese, or2Consume less coffee and more cheese: 1.The marginal rate of substitution of cheese for coffee is 3 (i.e., the marginal utility of cheese is three times the marginal utility of coffee), while the price ratio is 2 (i.e., cheese costs twice as much as coffee). 2.The marginal rate of substitution of cheese for coffee is 1 (i.e., the marginal utility of cheese is equal to the marginal utility of coffee) while the price ratio is 2 (i.e., cheese costs twice as much as coffee). 3.The marginal rate of substitution is initially equal to the price ratio, but the price of coffee increases. 4.The marginal rate of substitution is initially equal to the price ratio, but the price of cheese decreases. 5.The marginal rate of substitution is initially equal to the price ratio, but Dale enters exam…arrow_forward
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