EBK MANAGERIAL ECONOMICS & BUSINESS STR
EBK MANAGERIAL ECONOMICS & BUSINESS STR
9th Edition
ISBN: 8220103676267
Author: Baye
Publisher: YUZU
Question
Book Icon
Chapter 4, Problem 6CACQ
To determine

(a)

To find the prices of good X and Y.

Expert Solution
Check Mark

Explanation of Solution

The equation of Initial budget line is as follows:

$400=$100X+$200Y

The Standard Equation of budget line is as follows:

M=PXX+PYYWhere, M is the income of consumerPX is the price of good XPY is the price of good Y

On comparing with the standard equation of budget line price of good X is $100 and good Y is $200.

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

To determine

(b)

To find the number of units of good Y that can be purchased at point A.

Expert Solution
Check Mark

Explanation of Solution

The number of units of good Y that can be purchased at point A is calculated as follows:

$400=$100X+$200YPutX=0$400=$100×0+$200Y$400=0+$200Y$200Y=$400Y=2units

Therefore, the number of units of good Y produced at point A is 2 units.

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

To determine

(c)

To find the number of units of good X that can be purchased at point E.

Expert Solution
Check Mark

Explanation of Solution

The number of units of good X that can be purchased at point E is calculated as follows:

$400=$100X+$200YPutY=0$400=$100X+$200×0$400=$100X+0X=4units

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

To determine

(d)

To find the number of units of good X that can be purchased at point B.

Expert Solution
Check Mark

Explanation of Solution

The number of units of good X that can be purchased at point B is calculated as follows:

At point B consumer spent his entire nominal amount of money on good Y and buy 2 units of good Y and using $100 gift certificate consumer can consume 1 unit of good X.

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

To determine

(e)

To find the number of units of good X that can be purchased at point F.

Expert Solution
Check Mark

Explanation of Solution

The number of units of good X that can be purchased at point F is calculated as follows:

At point consumer can consume 5 units of good X as buy spending his $400 income and additional $100 gift certificate, he is spending total of $500 on consumption of good X and consuming 5 units of good X.

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

To determine

(f)

To find the number of units of good X that can be purchased at point F.

Expert Solution
Check Mark

Explanation of Solution

Based on preferences consumer can rank his preference A, B, C and D.

Consumer will rank his preference as follow:

D>B>C>AD(liesonIC2)>B(liesbetweenIC1andIC2)>C(liesonIC2)>A(liesbelowIC1)

IC2 is the highest IC curve and gives more utility than IC1.

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

To determine

(g)

To analyze whether good X is a normal good or inferior good.

Expert Solution
Check Mark

Explanation of Solution

X is an inferior good because after getting gift card, he can spend gift card only on good X. Consumer is not splitting gift card on both the goods and using it to buy only X, which explains inferior nature of good X.

Economics Concept Introduction

Budget line: It is the graphical representation of all possible combination of two goods that consumer can afford within his limited income at given prices.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
a-c please
d-f
PART II: Multipart Problems wood or solem of triflussd aidi 1. Assume that a society has a polluting industry comprising two firms, where the industry-level marginal abatement cost curve is given by: MAC = 24 - ()E and the marginal damage function is given by: MDF = 2E. What is the efficient level of emissions? b. What constant per-unit emissions tax could achieve the efficient emissions level? points) c. What is the net benefit to society of moving from the unregulated emissions level to the efficient level? In response to industry complaints about the costs of the tax, a cap-and-trade program is proposed. The marginal abatement cost curves for the two firms are given by: MAC=24-E and MAC2 = 24-2E2. d. How could a cap-and-trade program that achieves the same level of emissions as the tax be designed to reduce the costs of regulation to the two firms?
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Microeconomics A Contemporary Intro
Economics
ISBN:9781285635101
Author:MCEACHERN
Publisher:Cengage
Text book image
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Microeconomics
Economics
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc