A consumer visiting an amusement park has a budget of $3600 and preferences u(x,y) = xy^2 over rides (x) and the composite good (y), with prices pX = 3 and pY = 1. In addition to the “single ride” tickets for pX = 3, the park also sells a promotional “bundle ticket” of 1000 rides for $2100 (you cannot buy multiple of these bundle tickets; but just one). (a) Draw the feasible (budget) set of the consumer who buys this bundle ticket and the budget set of the consumer who doesn’t buy this bundle ticket, on the same graph, with all relevant intercepts, slopes, intersections and other points. (b) Calculate the optimal bundle for the consumer. Does she buy the bundle ticket or not? (c) If the bundle ticket for $2100 gave permission for x rides in general (rather than 1000), what should x at least be, so that she would prefer buying the bundle ticket (to not buying)?

A consumer visiting an amusement park has a budget of $3600 and preferences u(x,y) = xy^2 over rides (x) and the composite good (y), with prices pX = 3 and pY = 1. In addition to the “single ride” tickets for pX = 3, the park also sells a promotional “bundle ticket” of 1000 rides for $2100 (you cannot buy multiple of these bundle tickets; but just one). (a) Draw the feasible (budget) set of the consumer who buys this bundle ticket and the budget set of the consumer who doesn’t buy this bundle ticket, on the same graph, with all relevant intercepts, slopes, intersections and other points. (b) Calculate the optimal bundle for the consumer. Does she buy the bundle ticket or not? (c) If the bundle ticket for $2100 gave permission for x rides in general (rather than 1000), what should x at least be, so that she would prefer buying the bundle ticket (to not buying)?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 4SQ

See similar textbooks

Similar questions

Marina decides to purchase a ring made from an alloy composed exclusively of gold (G) and titanium (T). The price of gold is $60 per gram, and the price of titanium is $30 per gram. Her total budget for the ring is $600. Her utility function is given by U(G,T) =GT. Suppose the price of titanium falls to $20 per gram. At the final basket, the optimal amount of titanium is（）grams.
Points on a utility possibility curve represent a given distribution of well-being between two persons an efficient allocation of resources the maximum well-being of any one person, given the resources available and the well-being of another person all of the above
Evaluate the one specific law which states that the marginal utility of a good orservice declines as more of the good or service is consumed in a specific timeperiod.
Assuming, there are two goods: coffee and tea. Your budget is 18000 KRW per day. The price of coffee pc ranges between 0 KRW to 6000 KRW The price of tea pt ranges between 0 and 5000 KRW a) Specify your indifference map of your preference relation b) Specify your utility function c) Specify a budget constraint based on the assumption above d) specify your own-price offer curves for coffee e) specify your curve Engel curve for coffee
Several local golf tournaments are coming up and Tommy needs to purchase golf balls in preparation. He has set a $150 budget and will choose golf balls that will give him as much utility as possible. A local sporting goods store sells a box of golf balls at a retail price of $30 and Tommy purchases 2 boxes. A few buddies tell Tommy about an online store that offers boxes of golf balls at a discounted price of $21, while all other prices remain the same, and Tommy decides to purchase 3 additional boxes of golf balls to keep on hand. Given this information, plot Tommy's demand curve for golf balls. Provide your answer below: Price of Golf Ball Boxes Online Store (4,$22) 20 Local Store (1,$10) —101 Quantity of Golf Ball Boxes
A negative marginal utility implies that the consumer has reached a point of satiation.
A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 15 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should Multiple Choice a. decrease consumption of product X and increase consumption of product Y. b. increase consumption of product X and increase consumption of product Y. c. decrease consumption of product Y and increase consumption of product X. d. stick with the current consumption mix because it yields maximum utility.
Suppose that BC1 on the following graph represents your initial budget constraint for good X and good Y, and point A represents the best bundle, given this choice set. After a change in the price of good X, your new budget constraint is now BC2. The compensated budget is parallel to BC2, representing the same tradeoff between good X and good Y, and it is tangent to the given indifference curve (U) at point B.
Suppose that consumer I has the utility function u(x,y) = x + 2y and consumer II has the utility function u(x,y) = min{x, 2y}. Consumer I initially has 12 units of y and zero units of x, while consumer II has 12 units of x and zero units of y. It is correct to state that, in competitive equilibrium, the agents' consumption basket will be:
You were presented with a utility maximizing rule which states: If you always choose the item with the greatest marginal utility per dollar spent, when your budget is exhausted, the utility maximizing choice should occur where the marginal utility per dollar spent is the same for both goods. That rule is expressed as follows: Group of answer choices (The marginal utility associated with good 1 / the price of good 2) = (the marginal utility associated with good 2 / the price of good 1) % change in price / % change in quantity (The marginal utility associated with good 1 / the price of good 1) = (the marginal utility associated with good 2 / the price of good 2) The marginal utility per dollar of good 1 > the marginal utility per dollar of good 2.
True/False Utility refers to the total satisfaction or happiness that an individual get from consuming a product.
Which of the following statements is false? Group of answer choices If marginal utility is negative, then total utility is downward-sloping. If marginal utility is decreasing, then total utility is decreasing. If marginal utility is diminishing, then total utility is concave. If marginal utility is diminishing, then total utility is increasing but at a decreasing rate.