Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 3CACQ
To determine
(a)
To find: The equation of consumers budget line.
To determine
(b)
To draw:
Consumers opportunity set diagram.
To determine
(c)
To draw:
Consumers opportunity set diagram when
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Students have asked these similar questions
A consumer has $300 to spend on goods X and Y. The market prices of these two goods are Px = $15 and Py = $5.
Draw the budget constraint for X and Y.
Suppose the income increases by $300. How does this increase in income affect the budget line and the market rate of substitution between goods X and Y? Draw a shift on the same graph of what happens to the budget constraint line when the price of good Y increases to $10. How does this change in the price of good X affect the market rate of substitution between goods X and Y?
Find the attached file.
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.
Chapter 4 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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Similar questions
- Draw the following scenario: Assume that Sam has well-behaved preferences and consumes hamburgers (vertical axis) and steak (horizontal axis). Further, Talib perceives hamburgers as an inferior good and steak as a normal good. Draw the effect of a decline in the price of steak on Sam’s optimal consumption of hamburger and steak. Make sure you show both substitution and income effects on both goods (axes).arrow_forwardPicture 1 : A college student has two options for meals: eating at the dining hall for $6 per meal, or eating a package of Cup O' Soup for $2 per meal. Her weekly food budget is $60. Assume that she spends equal amounts on both goods. On the following graph, use the green line (triangle symbol) to draw the college student's budget constraint. Then use the black point (plus symbol) to indicate the initial optimum in this case. Picture 2 : Suppose the price of a Cup O' Soup now rises to $3. Assume that the student now spends only 20 percent of her income on dining hall meals. On the preceding graph, use the blue line (circle symbol) to draw the college student's new budget constraint. Then use the grey point (star symbol) to indicate the new optimum in this case. As a result of this price change, the quantity of Cup O' Soup packages consumed ( decreased , increase ) ? This means that Cup O' Soup must be (a normal , an inferior) ? good, and the income effect (…arrow_forwardA consumer must divide $600 between the consumption of product X and product Y. The relevant market prices are Px = $10 and Py = $40. a. Write the equation for the consumer’s budget line. b. Illustrate the consumer’s opportunity set in a carefully labeled diagram. c. Show how the consumer’s opportunity set changes when the price of good X increases to $20. How does this change alter the market rate of substitution between goods X and Y?arrow_forward
- From the information given above calculate the price of Y. Given the information above, calculate how many X this consumer could purchase if all $1,000 were spent on X. Calculate the price of X. Suppose the price of X decreases to 2, what would be the marginal rate of substitution at the new optimal point?arrow_forwardYou are choosing between two goods, X and Y, and your marginal utility from each is as shown in the table below. 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 (price–quantity-demanded table) for X.arrow_forward
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