Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 6.A, Problem 6P
To determine
The
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The graph shows the budget line for a consumer who only
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Cookies (number per week)
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2
4
6
8 10 12
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The prices she's considering are shown in
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of the calculated utilities?
Draw a budget constraint and indifference curve for Pepsi and Pizza on the same graph. Show the optimum point and explain what it represents.
Show what happens to the budget constraint and the optimum when price of pizza rises?
Decompose the change in part 2 into income and substitution effect.
Derive the demand curve from this price change.
Chapter 6 Solutions
Principles of Economics (12th Edition)
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- What is the effect if price of x is increased? draw grapharrow_forwardExplain how the downward sloping demand curve can be derived using indifference curves and budget lines. Using the same technique, show that it is theoretically possible to have an upward sloping demand curvearrow_forwardsuppose you have a fixed income of $3000 per month and you want to allocate your budget between two products: X and Y. Let's say the price of good x is $10 per unit, and the price of good y is $20 per unit. What is the budget constraint? Draw it on a graph and label the intercepts and the slope.arrow_forward
- Explain using words and graphs where an individual demand curve is derived(where do they come from)?arrow_forwardCalculate marginal utility and marginal utility per dollar for the data provided in the table below: (round to two decimal places) The Price of wine is 4 The Price of Cheese is 0.95 The Consumer's budget for wine and Cheese is 16.73 GLASSES OF WINE 1 2 3 4 5 (WINE) TOTAL UTILITY 60 144 199 252 303 The Quantity of Wine this consumer would buy to maximize utility is : The Quantity of Cheese this consumer would buy to maximize utility is What is the consumer's Total Utility when optimized: (WINE) MARGINAL UTILITY 55 51 (WINE) MARGINAL UTILITY/dollar WEDGES OF CHEESE 1 2 3 4 5 (CHEESE) TOTAL UTILITY 20 53 69 83 96 (CHEESE) MARGINAL UTILITY 16 13 (CHEESE) MARGINAL UTILITY/dollararrow_forwardWhat is the difference between good x as a function of price and income and good x as a function of price and utility?arrow_forward
- Considering the following Diagram of consumer equilibrium, answer the following questions. If consumer has $100 to spend on X and Y at Budget line DE, what are the prices of X and Y products. What combination of X & Y maximizes the consumer’s total utility at Budget line DE? Why a consumer has moved to point B on Budget line DE1 from Point A of Budget line DE? Derive the demand curve of X product. What is relationship between X and Y productsarrow_forwardQuestions 5 (Demand). The following graph displays Adam's consumption point at a certain level of income. Suppose that x1 is a normal good, x2 is an inferior good, and Adam's income increases. Show this change on the following graph by drawing a new budget constraint and indifference curve. Explain why.arrow_forwardAnatoly's marginal utility for DVDS (D) is MU X and his marginal utility for Xbox games (X) is MUx D. Anatoly's income is $120, the price of a DVD is $20.00, and the price of an Xbox game is $10.00. How many DVDS and Xbox games does Anatoly consume to maximize his satisfaction? Anatoly consumesDVDs andXbox games. (Enter your responses using integers.)arrow_forward
- Calculate marginal utility and marginal utility per dollar for the data provided in the table below: (round to two decimal places) The Price of wine is 3 The Price of Cheese is 0.14 The Consumer's budget for wine and Cheese is 9.69 (WINE) (WINE) (CHEESE) (CHEESE) (CHEESE) GLASSES (WINE) WEDGES OF WINE MARGINAL OF CHEESE TOTAL UTILITY MARGINAL UTILITY MARGINAL TOTAL UTILITY MARGINAL UTILITY UTILITY/dollar UTILITY/dollar 1 70 10 Number Number Number Number 35 160 6 Number 65 Number 225 3 41 Number Number Number Number 4 45 4. 288 Number 61 Number 48 349 The Quantity of Wine this consumer would buy to maximize utility is : Number Number The Quantity of Cheese this consumer would buy to maximize utility is : What is the consumer's Total Utility when optimized : Numberarrow_forwardSolve the attachment. imagearrow_forwardHafidh’s income is $200 a month. The price of watch is $25 a show, and the price of a Jeans is $15. Calculate the equation for Hafidh’s budget line Draw a graph of Hafidh’s budget line with the quantity of Watches on the x-axis. If Hafidh’s income increased from $200 to 350$. Explain and show how Hafidh’s budget line changes with watches on the x-axis.arrow_forward
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