Consider the figure above, which shows the budget constraint and the indifference curves of good King Zog. Zog is in equilibrium with an income of $300, facing prices P-$4 and P-$10. a. How much X does Zog consume? b. If the price of X falls to $2,50, while income and the price of Y stay constant, how much X will Zog consume? c. How much income must be taken away from Zog to isolate the Hicksian income and substitution effects (i.e., to make him just able to afford to reach his old indifference curve at new prices)? d. The total effect of the price change is to change consumption from the point to the point e. The income effect corresponds to the movement from the point the substitution effect corresponds to the movement from the point f. Is Xa normal good or an inferior good? to the point to the point while

Consider the figure above, which shows the budget constraint and the indifference curves of good King Zog. Zog is in equilibrium with an income of $300, facing prices P-$4 and P-$10. a. How much X does Zog consume? b. If the price of X falls to $2,50, while income and the price of Y stay constant, how much X will Zog consume? c. How much income must be taken away from Zog to isolate the Hicksian income and substitution effects (i.e., to make him just able to afford to reach his old indifference curve at new prices)? d. The total effect of the price change is to change consumption from the point to the point e. The income effect corresponds to the movement from the point the substitution effect corresponds to the movement from the point f. Is Xa normal good or an inferior good? to the point to the point while

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 15PAE

See similar textbooks

Similar questions

If you have the following table: Q Mux Muy 0 0 0 1 54 36 2 48 33 3 42 30 4 36 27 5 30 24 6 24 21 If px= 6 , and py=3 , Income = 36 , What are the equilibrium quantities of ( x , Y ) ? How much is (TUx) at Q = 2 ? If the income decreased to 27. How much is the new equilibrium quantity of X ?
Imagine a market that sells two goods: food, and energy, selling at prices PF and PC, respectively. In a graph, plot an indifference curve and explain how you derive the optimal level of consumption of food and energy using the budget constraint. In 2022/2023, the UK government introduced the Energy Bill Support Scheme, which gave every household a discount on their energy bills for winter in the form of an income subsidy. Replicating the graph above, indicate how the indifference curve changes in the presence of the subsidy. How much of the change in the demand of each good is due to an income effect and how much to a substitution effect? Now suppose the subsidy is removed, and we return to the initial indifference curve (point a.). Imagine then that energy prices decrease by 10%, while food prices remain constant. How does the equilibrium presented graphically in part (a.) changes? As before, indicate how much of the change in quantity of each good consumed is due to the…
Consider a person who consumes water and bread, deriving utility by xy if x is the amount of water consumed and y is the amount of bread consumed. Suppose this person's income is Rs. 10, the unit price of bread is Rs. 3 and the unit price of water facing this person is Re. 1. The price of water incorporates a per unit subsidy of Re. 1, i.e., for every unit of water consumed by this person, she pays Re. 1 to the water supplier and the government pays Re. 1 to the water supplier. Suppose this person's demand is (x0, y0). ,If the government provides this person a lump-sum income subsidy that exactly offsets her utility loss on account of removal of the water subsidy, then the required lump-sum subsidy is
A4Gary's demand function for good X is xG = 0.5 M/p where p is the price of the good and M denotes Gary's income. What is the slope of the Gary's compensated demand curve, assuming p= 7 and M = 209 dollars
The utility function of a certain consumer is U =(x1,x2)= x11/3 x22/3 , x 1and x 2 is the consumption of two kinds of goods, and the consumer's income is 100. The current prices of the two kinds of goods are P 1 =1 and P 2=2 respectively, ask: 1. If the price of the first commodity increases from 1 to 2, and other factors remain unchanged, what is the total effect of the price increase on the consumption of the first commodity? According to the Slutsky decomposition principle, what are the income effect and substitution effect? 2. Calculate the amount of income compensation that changes the price of the first commodity from 1 to 2, keeping the original effect unchanged
Consider your preferences for Gasoline (X) and a composite good (Y). Your utility function is U(X,Y) = X^(2/5 )+ Y^(2/5). You have an annual income of $40,000. Suppose the price of the composite good is $1. a) Due to shortages, the government has introduced a rationing system such that you can only consume a maximum of 5,000 liters a year at $1 a liter. What would be your optimal consumption bundle? b) The government removes the rationing system and the free market price of gasoline jumps to $2. What would be your new optimal consumption bundle? Are you better off with or without the rationing? Show by finding the utility levels. c) Illustrate your solution in a clearly labeled graph.
Assume that product X is quantified in the following manner:QDX= -2PX + 0,5PY - 0,2PZ + 1,2I. In which:QDX is a quality of product XPX is the price of product XPY is the price of product YPZ is the price of product ZI is the entry of the center of the userMake an argument to determine whether the demand curve for product X will change and how it will change for each of the following cases:i. Consumer income increasesii. The price of product X decreasesiii. The price of product Y increasesiv. The price of product Z decreases
Suppose the government implements an income support program with the intention of making sure residents are able to purchase sufficient food. The government pays a cash benefit to all individuals with incomes less than $1000 according the following formula: cash benefit (CB) = $200 – 0.2*(earned income(I)) Households spend all of their income on food (F) and other goods (X). The price of food and other goods are normalized to 1. A households budget constraint is F + X = CB + I Households have the following preferences: U = 0.25*ln(F) + 0.75*ln(X) Refer to Scenario 3 Suppose a household has earned income of $300 and instead of cash, the government benefit is in the form of food stamps, or vouchers, that must be spent on food. How much does the household spend on food now?
Earlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. 1. Illustrate the change in the market equilibrium through a graph. 2. What presumably happened to the total revenues of the sellers during the price hike period? a.) Compute the price elasticity of demand b.) Derive the total revenue before the hike (TR1), and after the hike (TR2).
Earlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. Illustrate the change in the market equilibrium through a graph. What presumably happened to the total revenues of the sellers during the = price hike period? Compute the price elasticity of demand. Derive the total revenue before the hike (TR1), and after the hike (TR2).
(a) Given the quadratic supply and demand functions, determine the equilibrium price and quantity. P = Q2S + 2QS + 12 P = -Q2D - 4QD + 68 b) Given C = 0.8Y + 80 I = 70 G = 130 X = 100 M = 0.2Y + 50 Find (I) The reduced form (II) Determine the equilibrium level of income using reduced form.
Please draw 4 simple graphs for me to show the movements of the indifference curves or budget lines. Imagine a market of food (y axis) and energy (x axis). shwo the the optimal level of consumption of food and energy on an indifference curve an energy bill support scheme giving households a discount on energy bills in the form of an INCOME SUBSIDY Remove the subsidy and now decrease energy prices by 10% whilst food prices remain constant from the original graph show the impact of a subsidy to producers resulting in a reduction of both energy prices and food prices by 10% for each explain how much of the change in quantity of each good consumed is due to an income effect and how much to a substitution effect?