
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Consider Figure 1 to answer the questions that follow. Figure 1 represents a budget constraint for a
person that is choosing to buy cheeseburgers (C) and milkshakes (M).
Question 3
5
Figure 1
10
M
Consider Figure 1 above. If someone tells you the price of cheeseburgers (C) is $4, how much income does
the person have that is represented by this budget constraint? Enter the number below with no dollar
sign.
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- 5. 7. 5. Bob budgets $24 a week for entertainment. He splits his time between going to the movies and going to the gym. Based upon the information contained below, find Bob's utility maximizing point. First: Complete the budget constraint. (Determine what combinations are possible.) Income: $24 Movie Price: $6 Gym Session Price: $3 Movies Gym Sessions Second: Complete this chart and use it to determine the utility maximizing point. Total MU MU per $ Gym Total MU Visits Utility Movies MU Utility per $ 0. 30 1 2, 50 5 85 76 115 4 92 4 107 111 114 5. 103 91 115 6. Thinking laterally: Forlunch. Maria eats onlv salads or vegetarian burgers, Her weekly fond bud sh (United States) 234 5arrow_forwardGraphically draw and explain the income effect curve: 1.Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie’s income is m. (b)Suppose m = $60. Write down Annie’s budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully. (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve.arrow_forwardDescribe and graph your own example of a budget constraint using two goods (don’t forget to label your axes). In your example, make sure to state what the budget is, the price of the two goods, what the slope of the budget constraint equals (make sure to include the correct sign), and interpret what the slope represents.arrow_forward
- draw a budget constraint and indifference curves for pizza and pepsi .show what happens to budget constraint and consumer's optimum when the price of pizza rises .in your diagram, decompose the change into an income effect and a substitution effectarrow_forwardJody has $360 to spend on her summer vacation. She decided to use the moneyon trips to the zoo and on tickets to the movies. Her original budget constraintis shown below. Let X represent movie tickets and Y represent trips to the zoo.i. What is the equation of the original budget constraint? ii. What is the price of a movie ticket? a trip to the zoo? iii. Assume a price change occurs and Jody now face the new budgetconstraint. What is the equation of the new budget constraint? iv. With the new budget constraint, what is the price of an amusement parkticket? a baseball ticketarrow_forward34) Consider Dianna who has a $25 fast food budget per month. She can purchase salads (S), hamburgers (H), or chicken strips (C). The price of a salad is Ps=$3, the price of a hamburger is PB-$2 and the price of chicken strips is Pc $4. Fill in the table below. You will use your solutions to answer questions 34-36. # Hamburgers # Salads 1 2 2 MU Salads 36 30 c) 4; 3; 4 d) 5; 4; 5 MU/P Salads 1 2 3 4 5 MU hamburgers 5 In the optimal consumption bundle for Dianna, she will purchase chicken strips. a) 2; 1; 2 b) 3; 2; 3 28 22 16 36) Dianna total utility from her consumption bundle is a) 126 b) 504 c) 106 d) 398 MU/P # Hamburgers Chicken Strips T 2 3 7 salads, 4 5 35) Dianna's utility is maximized where the marginal utility per dollar spent on each item is equal to a) $10 b) $12 c) $14 d) $16 MU Chicken Strips 72 64 56 48 40 hamburgers, and MU/P Chicken Stripsarrow_forward
- Suppose Sam has a weekly budget of $48 to spend on juice and yogurt. Juice is priced at $4 per gallon, and yogurt is priced at $2 per container. gallons of juice. If he spends his entire $48 on yogurt, he can buy containers of If Sam spends his entire $48 on juice, he can buy yogurt. Use the blue line (circle symbol) to plot Sam's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of juice and yogurt that are affordable for Sam. Finally, place the black point (plus symbol) on the point on Sam's budget constraint that corresponds to a scenario in which Sam spends $24 on each good. Note: Dashed drop lines will automatically extend to both axes. ? 36 33 30 27 24 21 18 12 9 6 3 YOGURT (Containers) 0 0 + 3 6 9 12 15 18 21 JUICE (Gallons) 24 27 30 33 36 BC, ($48) 0 Affordable Region $24 on Each BC₂ ($60)arrow_forwardAssignment Graphically draw and explain the income effect curve: 1. Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie's income is m. (b)Suppose m = $60. Write down Annie's budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully. ( 02 Marks) (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve. (02 Marks) 2. Why indifference curves never intersect. Prove graphically? (1 Mark)arrow_forward
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