. Make a graph with the budget constraint showing the trade-off between lifetime consumption and number of children. (Ignore the fact that children come only in whole numbers!) Show indifference curves and an optimum choice. b. Suppose the wage increases to $15 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on number of children and lifetime consumption. c. We observe that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model? Explain.

. Make a graph with the budget constraint showing the trade-off between lifetime consumption and number of children. (Ignore the fact that children come only in whole numbers!) Show indifference curves and an optimum choice. b. Suppose the wage increases to $15 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on number of children and lifetime consumption. c. We observe that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model? Explain.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter5: Consumer Choice: Individual And Market Demand

Section: Chapter Questions

Problem 3DQ

See similar textbooks

Similar questions

Public schooling is a "take-it-or-leave-it" option. Individuals are not allowed to supplement public education with private lessons. How would the diagram be modified if parents could purchase additional houses of education for their children who are already enrolled in public school? a. No change to the diagram b. The budget constraint shifts to the right and passes point X c. The budget constraint shifts left and passes point c0 d. The indifference curve shifts down and to the left and passes point x
Suppose a family (with 1 child) earns $50,000 per year and there is no publicly provided education. Assume the price of other goods is $2,000 and the price for education/ year is $5,000. Draw the family's budget constraint. Show how free public education worth $20,000 per student changes the budget constraint. Draw a set of indifference curves to show that the family increases education consumption after b. Show how a school voucher redeemable for $20,000 worth of education changes the family's budget constraint. What happens to the amount of education the family purchases for the child?
Ms. Shanila works as a free-lance worker at a software house. Suppose she keeps awake for 100 hours a week. Also suppose that part of this time she can spend on earning money doing this job and using it for her consumption, and the rest of the time she can spend on her leisure not earning money. At first, she earns Rs.500 for every hour she works. Draw a figure showing Shanila’s budget constraint, her indifference curve for consumption and leisure and her optimum. ii If per hour wage paid to her increases to Rs.600 for doing exactly the same work, draw figures to explain why she would increase her working hours or decrease her working hours. iii Mr. Khan is planning for his requirement. Suppose he can consume his salary of Rs. 100,000 while he is in service or save his salary to consume it after retirement. When he saves his salary he will get 10% interest on it. Draw Dr. Khan’s budget constraint, his indifference curve and his optimum. iv If interest rate goes up to 20%, draw figures…
Using a diagram, draw the outcome of optimal choice using an indi↵erence curve and the individual’s lifetime budget constraint.
if we take examples and suppose there are 2 products, milk and yoghurt, and if the milk is rationed for people by government, how can we understand the satisfaction maximization choice with the indifference curve and budget line
Moe and Curly both face the same budget line for consumption and leisure. At every possible consumption-leisure bundle on the budget line, Curly always requires marginally more leisure than does Moe in order to be equally happy when asked to forego a dollar of consumption. Using a standard budget line, graph the indifference curves for Moe and Curly that shows the optimal consumption-leisure bundle for both people. Which person optimally chooses more consumption? Which feature of indifference curves guarantees this result?
People who misunderstand the optimal purchase rule argue that if a consumer buys so much of a good that it's price is equal to marginal utility, she could not be behaving optimally. Rather, they sat, she would be better of quitting while she was ahead, or buying a quantity such that marginal utility is much greater than the price. What's wrong with this argument? Answer with a graph
Joe's income is $1000, the price of pizza (P) is $10 per unit, and the price of burger (B) is $8. Which of the following represents his budget constraint? Group of answer choices 500+4B=5P 1000=8P+10B 100=P+1.2B 5P+4B=500
If the price of restaurant meals is overall higher in big cities then you might expect young people in those cities to spend more on those meals as a percent of their income than similar people in the suburbs. The answer must then lie with the preferences of those young people with their utility curves. Do you think that people reveal their preferences in part by where they choose to live?
Derive the relationship between the quantity of X demanded and the price of X if the consumer’s indifference map vis-à-vis X and Y has curves concave to the origin. Let X be games of golf per annum and Y all other goods. Draw the indifference map and budget constraint of: (a) an amateur who pays to play golf; (b) a professional who is paid to play golf. May we conclude that golfers turn professional because they dislike the game?
What is "bounded rationality"? a. Gathering all necessary information before making a decision. b. People only make choices that gives non-negative utility. c. Limits on information, time, and abilities might prevent people from seeking out the best possible outcome. d. Human beings are often restricted/forced to make only rational decisions.