ECON MICRO (with ECON MICRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
ECON MICRO (with ECON MICRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305631946
Author: William A. McEachern
Publisher: Cengage Learning
Question
Book Icon
Chapter 6, Problem 2.6P
To determine

The consumer equilibrium in three commodity case and also draw the demand curve for good A.

Concept Introduction:

The Law of Demand: It states that, keeping other things constant, there is an inverse relation between price and quantity demanded.

Marginal Utility: It is the net addition to the total utility when an additional unit of good is being consumed.

  MU=TUnTUn1

Consumer equilibrium: In order to maximize his utility, the consumer will spend his income in such a way so that the following condition is satisfied:

  MU from good 'x'Price of good 'x'=MU from good 'y'Price of good 'y'

Expert Solution & Answer
Check Mark

Explanation of Solution

(a) With the help of given information, we can find out the consumers equilibrium in three commodity case. The following condition has to be satisfied in order to maximize the utility.

  MU from good 'A'Price of good 'A'=MU from good 'B'Price of good 'B'=MU from good 'C'Price of good 'C'

The price of A = $2

The price of B = $3

The price of C = $1

    Quantity MUA MUB MUC MUAPA MUBPB MUCPC
    1507525252525
    2406020202020
    33040151513.3315
    4203010101010
    515207.57.56.667.5

Daniel’s income is $24 per week.

The utility can be maximized when Daniel consumes 4 units of each good A, B and C because at this level, consumer’s equilibrium condition is satisfied and he is spending his whole income on purchase of these goods.

(b) If the price of A is $4 and other things are held constant.

    Quantity MUA MUB MUC MUAPA MUBPB MUCPC
    150752512.52525
    2406020102020
    33040157.513.3315
    420301051010
    515207.53.756.667.5

In this case, consumer will purchase 2 units of good A and 4 units of good B and C. In this way, he will be able to spend his entire income on the purchase of three goods and maximizes his utility.

(c) When the price of good A is $2, Daniel is consuming 4 units of good A.

When the price of good A rises to $4, Daniel is consuming 2 units of good A. We can plot these points on the graph and will get the demand curve.

ECON MICRO (with ECON MICRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press), Chapter 6, Problem 2.6P

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
Discuss the preferred deterrent method employed by the Zambian government to combat tax evasion, monetary fines. As noted in the reading the potential penalty for corporate tax evasion is a fine of 52.5% of the amount evaded plus interest assessed at 5% annually along with a possibility of jail time. In general, monetary fines as a deterrent are preferred to blacklisting of company directors, revoking business operation licenses, or calling for prison sentences. Do you agree with this preference? Should companies that are guilty of tax evasion face something more severe than a monetary fine? Something less severe? Should the fine and interest amount be set at a different rate? If so at why? Provide support and rationale for your responses.
Not use ai please
For the statement below, argue in position for both in favor or opposed to the statement.  Incompetent leaders can't be ethical leaders. Traditional leadership theories and moral standards are not adequate to help employees solve complex organizational issues.

Chapter 6 Solutions

ECON MICRO (with ECON MICRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

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
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
ECON MICRO
Economics
ISBN:9781337000536
Author:William A. McEachern
Publisher:Cengage Learning
Text book image
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning