For two goods that I consume and I like both of them, say hamburger and Ice Latte, if hamburger is drawn on the horizontal axis and Ice Latte drawn on the vertical axis, if a uniform ad valorem sales tax of 8% is levied on both of them, this will only shrink the budget set but has no effect on slope of the budget line. O True O False

For two goods that I consume and I like both of them, say hamburger and Ice Latte, if hamburger is drawn on the horizontal axis and Ice Latte drawn on the vertical axis, if a uniform ad valorem sales tax of 8% is levied on both of them, this will only shrink the budget set but has no effect on slope of the budget line. O True O False

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 3SQP

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a consumer has income of RM 3,000. Orange Juice costs RM3 glass and chicken rice cost RM6 a palte. Draw the consumers budget constraint and what is the slope of this budget constraint? Draw a consumer's indifference curves for orange juice and chicken rice. describe and explain 4 propeties of these indiffrence curves consider your decision about how many hours to work draw your budget constraint assuming that you pay no taxes on your income. on the same diagram draw another budget constraint assuming that you pay 15 percent tax show how tax might lead to more hours of work, fewer hours or the same number of hours. Explain.
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Khan lives in a world with two consumption goods x and y. Her utility function is U (x, y) = √x² + y². a. If px = $3,py = $4, and her income, I, is equal to $50, what will be the quantities of x and y that Maya should buy to maximize her utility? Make sure that you write out the Lagrangian and the first-order conditions. (Hint: It may be easier to maximize U² than U). Have you found a true maximum? Explain your answer.
1. A consumer has income of RM3000. orange juice costs RM3 a glass, and chicken rice costs RM6 a plate. Draw the consumer's budget constraint. what is the slope of this budget constraint. 2. Draw a consumer's indifference curves for orange juice and chicken rice. describe and explain four properties of these indifference curves. 3. Consider your decision about how many hours to work. a) Draw your budget constraint assuming that you play no taxes on your income. on the same diagram, draw another budget constraint assuming that you pay 15 percent tax. b) Show how the tax might lead to more hours of work, fewer hours, or the same number of hours. Explain.
Suppose a consumer with a utility function U(x,y) =x 0.5 y 0.5 and an income of $500.00. Considering that X and Y products are sold by the kilo and that their prices are 25.00 and 50.00 respectively, calculate: a) Maximizing amounts of x and y for the consumer b) Graphically sketch the consumer balance c) Discuss the following statement: "if the consumer's income increases by 20%, the consumer will also consume 20% more of each of the products"
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(18 points) Suppose you have $30 and you are going to rent some movies and buy some sodas. Suppose movie rentals are $6.00 each and sodas are $1.00 each. Your original consumption bundle is 3 movies and 12 sodas. Show all calculations. (Hint: put movie rentals on the X axis) (2 points) Draw your budget line showing the different combinations of Movies that you can rent and sodas that you can purchase. (2 points) Suppose that movie rentals turn out to be half off ($3.00). Draw your new budget line on the same graph. (4 points) Draw the income compensated budget line and show the calculation for the income compensated budget line (2 points) Draw an indifference curve tangent to your original budget line at your original purchase point. (2 points) Draw an indifference curve showing where you will purchase at the new prices (6 points) Breakdown the shift from the original point of consumption to the new point of consumption using the income and substitution effects. Please provide a…
Assume, as in Exercise 22.1, that a consumer has utility function F or fruit and chocolate. Determine the consumer's demand functions q1(P1, P2, M) and q2(P1, P2, M). Determine also It* in terms of P1, P2 and M. Find the indirect utility function and show that It* = 8Vj8M. Suppose, as before, that fruit costs $1 per unit and chocolate $2 per unit. If the income is raised from $36 to $36.5, determine the precise value of the resulting change in the indirect utility function. Show that this is approximately equal to (O.5)λ*, where λ* is evaluated at P1 = 1,P2 = 2 and M = 36. Exercise 22.1 A consumer purchases quantities of two commodities, fruit and chocolate, each month. The consumer's utility function is For a bundle (X1, X2) of X1 units of fruit and X2 units of chocolate. The consumer has a total of $49 to spend on fruit and chocolate each month. Fruit cost $1 per unit and chocolate costs $2 per unit. How many units of each should the consumer buy…
A consumer has GH¢600 to spend on two commodities, A and B. Commodity A costs GH¢20 per unit and Commodity B costs GH¢30 per unit. Suppose that the utility derived by the consumer from x units of Commodity A, and y Commodity B is given by the Cobb-Douglas utility functionU (x, y) = 10x0.6y0.4a. How many units of each commodity should the consumer buy tomaximize utility?b. Is the budget constraint binding?
Suppose Karpov also enjoys eating nuts and berries. His utility function is u(c1,c2)=min{c1+2c2,2c1+c2}u(c1,c2)=min{c1+2c2,2c1+c2} where c1c1 is nuts and c2c2 is berries. However, Karpov faces different prices to Magnus. The prices he faces for nuts and berries are 3 and 2 respectively. Given his income of 10, how many units of nuts and berries does he consume? At what prices will Karpov only consume nuts and no berries? And, at what prices will he only consume berries and no nuts? Find all price and income combinations where Karpov will choose to consume equal quantities of berries and nuts.
Suppose that a fast-food junkie derives utility from three goods-soft drinks (x), hamburgers (y), and ice cream sundaes (z)− according to the Cobb-Douglas utility function U(x,y,z)=x0.5y0.5(1+z)0.5. Suppose also that the prices for these goods are given by px=1,py=4, and pz=8 and that this consumer's income is given by I=8.a. Show that, for z=0, maximization of utility results in the same optimal choices as in Example 4.1 . Show also that any choice that results in z>0 (even for a fractionalz ) reduces utility from this optimum.b. How do you explain the fact that z=0 is optimal here?c. How high would this individual's income have to be for any z to be purchased?
a good is normal, then an increase in the price of the good will lead to which of the following to be true for this good? (Assume that there are only two goods, the individual's preferences lead to well-behaved preferences with strictly convex indifference curves and an interior solution for all budgets). Let SE = substitution effect, IE = income effect) (a) The magnitude of the IE for this good must be larger than the magnitude of the SE (b) The magnitude of the SE for this good must be larger than the magnitude of the IE (c) The good could be a Giffen good d) The good must be an ordinary good ( (e) None of the above