If the consumer respects his budget constraint, he can purchase any commodity bundle ___. a. above his budget line b. any of the above c. below his budget line d. on or below his budget line e. on his budget line
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- 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?Suppose a consumer has income of dollars 20 which to be spent on good B and A. Good B cost dollar 4 and good A cost dollar 2 ,then A. Determine budget equation? B.draw budget line?For a rational consumer who has to choose between two goods in the context of budget constraints, the price change of one of the goods, ceteris paribus (i.e the other things remain the same) will determine: Wählen Sie eine Antwort: a parallel shift of the budget line to the right a parallel shift of the budget line to the left a change in the slope of the budget line no change in the budget line
- a. Suppose Fiona’s income is $100 per week, which she allocates between chocolates and books. Chocolates cost $2 each. Books cost $10 each if she purchases between 1 and 5 books. If she purchases more than 5 books in a week, the price falls to $5 for the 6th book and all subsequent books. Draw the budget constraint. Is it possible that Fiona might have more than one utility-maximizing solution? b. Confirm that if a consumer’s utility function is described by U = 2X + Y, and prices are px = 2 and py = 1, there is no unique utility maximizing solution regardless of income level. What does this tell you about X and Y as commodities? (Hint: draw a graph showing a budget constraint and indifference curve using the information provided.)please urgent EXERCISE 2 Ravi has £21 to spend on pastries and biscuits. If he spends all the money on pastries, he can afford 15 pastries. The slope of Ravi’s budget line (assuming his pastries consumption is measured on the horizontal axis and his biscuits consumption is measured on the vertical axis) is -3.5 (3.5 in absolute terms). a) Calculate the price of a pastry and the price of a biscuit. Write down Ravi’s budget equation and draw the corresponding budget line. Mark the consumption bundle mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. b) Discuss how Ravi’s budget set would change if his budget doubles. Show the relevant changes graphically. How could the price of a pastry increase so that Ravi could still afford to buy 15 pastries? c) Discuss how Ravi’s budget constraint would change if the government imposed a tax of £0.50…Assume that a consumer faces the budget line AB and the price of X is Taka 20. All money spent after goods X enable him/her to buy 100 units while all money spent on Y enable him/her to buy 25 units of Y. Consumer’s income -----------The price of Y is Taka -------- The equation for the budget line AB is ……… What combination of X and Y does the consumer choose assuming that at utility maximum amount of X is 50 units X? Why? The marginal rate of substitution for this combination is ……………. OR: Explain the equal marginal principle and give an example.
- A consumer’s budget set for two goods (X and Y) is 500 ≥ 4X + 5Y.a. The budget set is illustrated below. What are the values of A and B? The horizontal axis is labeled Good X. The vertical axis is labeled Good Y. A line begins at a point on the vertical axis goes down to the right and ends at a point on the horizontal axis. A = B = b. Does the budget set change if the prices of both goods double and the consumer’s income also doubles? multiple choice Yes, it rotates clockwise Yes, it shifts out from the origin Yes, it shifts in toward the origin No, it does not change c. Given the equation for the budget set, what are the prices of the two goods?Good X: $ Good Y: $ What is the consumer’s income? $8. Donald derives utility from only two goods, carrots (Qc) and donuts (Qd). His utilityfunction is as follows:U(Qc,Qd) = (Qc)(Qd)The marginal utility that Donald receives from carrots (MUc) and donuts (MUd) aregiven as follows:MUc = Qd MUd = QcDonald has an income (I) of $120 and the price of carrots (Pc) and donuts (Pd) are both$1.a. What is Donald's budget line?b. What is Donald's income-consumption curve?c. What quantities of Qc and Qd will maximize Donald's utility?d. Holding Donald's income and Pd constant at $120 and $1 respectively, what is Donald'sdemand curve for carrots?e. Suppose that a tax of $1 per unit is levied on donuts. How will this alter Donald's utilitymaximizing market basket of goods?f. Suppose that, instead of the per unit tax in (e), a lump sum tax of the same dollar amountis levied on Donald. What is Donald's utility maximizing market basket?g. The taxes in (e) and (f) both collect exactly the same amount of revenue for thegovernment, which of the two taxes…What happens to the original budget line if the price of good ? falls to 4$? (i.e., Will there be a change in the slope and/or intercepts of the original budget line? If yes, what are those changes?). Interpret economically how the change in the price of good ? affects the consumption decision of the consumer.
- Mrs. Rochester earns $4500 a week and spends her entire income on computers andpastries, since these are the only two items that provide her utility. Furthermore, Mrs.Rochester insists that for every computer she buys, she must also buy a pastry. A) Suppose the price of pastries increases to $20 and income decreases to $3200. Whatis the new algebraic equation for Mrs. Rochester’s budget constraint? Show theimpact of the new budget line relative to the original budget line. B) What would be the new marginal rate of substitution that corresponds to theoptimal consumption choice? Interpret the marginal rate of substitution. D) Assume for this question only that when the price of computers decreases, less ofthat good is demanded. Illustrate the income and substitution effect of this pricedecrease.(a) A good is a luxury if it has a budget elasticity larger than 1, (i.e., good k is a luxury if εk ≡∂qk/∂m *m/qk> 1). Show that when a good is a luxury, then if a consumer’s total budget rises, theywill raise the share of their budget they allocate to the good. (b) Suppose m is the total budget a consumer has available to spend on three electronic products,a laptop, a phone and a tablet. Can all three of these goods simultaneously be luxuries? Whyor why not?please do workings.. Susan has the option to purchase eyeglasses, E, $3 each, and orange juice,O, $1 each. Her income is $24.i. Draw the budget line, with eyeglasses on the vertical axis, and orange juice on the horizontal axis, and compute the values of the intercepts.ii. What is the slope of the budget constraint? Are the following combinations of goods in the affordable set: (4E and 9O), (6E and 2O), (3E and 15O)? iii. Illustrate what happens to the budget line if the price of orange juice increases to $2. iv. Using the results in part (iii) explain the income and substitution effects?