The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

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Answer 1

Question

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.

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How does a consumer’s optimal choice of goods change if all prices and the consumer’s income double?

Answer 2

Question

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.

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Answer 4

Question

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.

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Answer 5

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.

Answer 6

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.

Answer 7

Chapter 4, Problem 1RE

To determine

To evaluate:

The decision of choosing a basket on budget line when marginal utility arising from two goods is positive.

Answer 8

Expert Solution & Answer

Explanation of Solution

Budget line shows the budget constraint, which means the combinations of goods and services that can be possibly attained with the given current prices and limited income.

Positive marginal utility of a consumer means that the bundles of goods choosenprovides satisfactory utility. The utility arising from the consumption of an additional unit of a good is positive which meansone could increase utilityby consuming some basket outside the budget line but doing this or crossing the budgetline is unaffordable and not feasiblefor consumer. Thus, one chooses basket that lies along the budget line as the most preferred basket.