The table below represents Sue's preferences for bottled water and soft drinks, the combination of which yields the same level of utility. Marginal Rate of Substitution of Soft Drinks for Bottled Water Combination of Bottled Water and Soft Drinks A B E Bottled Water per month 5 10 15 20 25 Soft Drinks per month 11 7 4 2 1 0.80 0.60 0.40 0.20 Sue's monthly budget for bottled water and soft drinks is $20.00. The price of bottled water is $0.80 per bottle, and the price of soft drinks is $2.00 per bottle. If water is on the horizontal axis and soft drinks are on the vertical axis, the slope of Sue's budget constraint is 0.40. (Enter your response rounded to two decimal places and include a minus sign if necessary.) Given the information on Sue's budget constraint and her preferences, the combination of goods that satisfies her utility-maximizing problem is D

The table below represents Sue's preferences for bottled water and soft drinks, the combination of which yields the same level of utility. Marginal Rate of Substitution of Soft Drinks for Bottled Water Combination of Bottled Water and Soft Drinks A B E Bottled Water per month 5 10 15 20 25 Soft Drinks per month 11 7 4 2 1 0.80 0.60 0.40 0.20 Sue's monthly budget for bottled water and soft drinks is $20.00. The price of bottled water is $0.80 per bottle, and the price of soft drinks is $2.00 per bottle. If water is on the horizontal axis and soft drinks are on the vertical axis, the slope of Sue's budget constraint is 0.40. (Enter your response rounded to two decimal places and include a minus sign if necessary.) Given the information on Sue's budget constraint and her preferences, the combination of goods that satisfies her utility-maximizing problem is D

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 1SCQ: Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can...

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Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a roundâ€”trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.
As a college student you work at a part-time job, but your parents also send you a monthly allowance. Suppose one month your parents forgot to send the check. Show graphically how your budget constraint is affected. Assuming you only buy normal goods, what would happen to your purchases of goods?
Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utilityâ€”maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.