Holding all else equal, indicate how each of the following changes would affect a budget constraint that limits consumption of goods (Y) and services (X). Explain your answer. Deflation that uniformly drops the price of all goods and services. Inflation that consistently increases the price of all goods and services. Technical change that reduces the price of goods, but leaves the price of service unchanged

Holding all else equal, indicate how each of the following changes would affect a budget constraint that limits consumption of goods (Y) and services (X). Explain your answer. Deflation that uniformly drops the price of all goods and services. Inflation that consistently increases the price of all goods and services. Technical change that reduces the price of goods, but leaves the price of service unchanged

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 10SQ

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Budget ConstraintsHolding all else equal, indicate how each of the following changes would affect a budget constraint that limits consumption of goods (Y) and services (X). Explain your answer.Deflation that uniformly drops the price of all goods and services.Inflation that consistently increases the price of all goods and services.Technical change that reduces the price of goods, but leaves the price of services unchanged.Economic growth that boosts the level of disposable income.Government-mandated health care coverage for workers that boosts the price of goods by 3% and increases the price of services by 5%.
Consider a consumer who wants to consume only two commodities and has an income of $250. Assume the price of good 1 is $25 per unit and the price of good 2 is $50 per unit. Now, inflation causes the price of good 1 to increase to $30 per unit, while the price of good 2 increases to $60 per unit. On the other hand, the consumer also gets a raise of $110 (so her new income is $360). What will happen to the consumption bundles (x₁, x₂)?
If the budget constraint shifts from BC2 to BC1, then A. the consumer decreased the amount budgeted for these two goods. B. the consumer increased the amount budgeted for these two goods. C. the price of the X good increased. D. the price of the Y good increased. E. the price of the Y good decreased.
Diminishing marginal rate of substitution for a good means: I. decreasing the quantity of a good that the consumer would give up for one more additional quantity of the other good II. increasing the quantity of a good that the consumer would give up for one more additional quantity of the other good III. no change for the quantity of a good that the consumer would give up for one more additional quantity of the other good IV. all answers are correct
Suppose initially that the price of X is $5, the price of Y is $10, and the consumer's income is $100. If Y is measured on the vertical axis, X is measured on the horizontal axis, and the price of Y increases to $20: a. the entire budget line will shift inward toward the origin, with its slope changing from –1/2 to –1/4. b. the budget line will pivot inward toward the origin along the X axis, with its slope changing from –1/2 to –1/4. c. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from –1/2 to –1/4. d. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from –1/4 to –1/2.
Explain how the budget constraint might change if income and prices of all goods increased in same proportion?
Q30 The marginal rate of substitution is the... a. Rate of substitution between the marginal values of any two goods. b. Rate of substitution between the total utility of any two goods. c. Substitution of one good for another as we move along the budget line. d. Amount of one good the consumer is willing to give up in exchange for another to keep total expenditure unchanged. e. Amount of one good the consumer is willing to give up in exchange for another to remain indifferent.
Which of the following statements is correct? Suppose leisure is a normal good, then an increase in non-labor income always increases labor supply. Suppose leisure is a normal good, then an increase in wage rate increases labor supply if the income effect dominates the substitution effect. Suppose leisure is an inferior good, then an increase in non-labor income increases leisure hours. Suppose leisure is a normal good, then an increase in non-labor income reduces labor supply. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
By not taking into account consumers' ability to substitute toward goods that become relatively cheaper over time, the CPI Group of answer choices may overstate or understate the increase in the cost of living, depending on how quickly prices rise., (Incorrect answer)may overstate or understate the increase in the cost of living, depending on how quickly prices rise. may overstate or understate the increase in the cost of living, regardless of how quickly prices rise. understates the increase in the cost of living. overstates the increase in the cost of living.
A basket of goods for a given consumer includes two goods, X and Z. Consumer income is equal to $1,500 and the prices of these two goods are as follows: Px = $25 Pz = $25 This consumer is consuming10 units of good X. Suppose that over the course of a year, the price of good X changes by 10% and the price of good Z changes by −10%. How much income would be required for the consumer to afford the same quantity of goods X and Z with the new prices? $______
Microeconomic substitution is impossible for the economy as a whole because a. money is a veil. b. the prices of some goods and services adjust sluggishly in response to changing economic conditions. c. a lower price level increases real wealth, which stimulates spending by consumers and vice-versa. d. real GDP measures the total quantity of goods and services produced by all firms in all markets.
Explain how Consumer Choice Theory helps explain decisions concerning the consumption of two goods. Further, discuss how Indifference Curves apply to this theory and the role played by the Budget Constraint. Note: apply the goods to inputs used in your fictitious business idea.