Maria spends all of her income of $2,000 on food (F) and clothing (C). The prices per unit are: PF = $5 and PC = $20. (d) Graph Maria’s budget line, with F on the vertical axis and C on the horizontal axis. (e) Maria (can, cannot) __________ afford to buy a combination of 200 F and 60 C because this combination of goods is located (outside, inside, on) __________ her budget line. (f) The slope of this budget line is _________.
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Maria spends all of her income of $2,000 on food (F) and clothing (C). The
(d) Graph Maria’s budget line, with F on the vertical axis and C on the horizontal axis.
(e) Maria (can, cannot) __________ afford to buy a combination of 200 F and 60 C because this combination of goods is located (outside, inside, on) __________ her
budget line.
(f) The slope of this budget line is _________.
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- Question 1 Maria spends all of her income of $2,000 on food (F) and clothing (C). The prices per unit are: PF = $5 and PC = $20. (a) The maximum amount of food that Maria can consume is _____. (b) The maximum number of pieces of clothing that Maria can consume is ____. (c) Therefore the intercepts of Maria’s budget line are _____ F and _____ C. (d) Graph Maria’s budget line, with F on the vertical axis and C on the horizontal axis. (e) Maria (can, cannot) __________ afford to buy a combination of 200 F and 60 C because this combination of goods is located (outside, inside, on) __________ her budget line. (f) The slope of this budget line is _________. (g) The opportunity cost of one piece of clothing is ___ units of food. h) If Maria’s income rises to $3,000, the new intercepts of her budget line are _____ F and _____ C. (i) Graph this new budget line on your graph for item (d) above.Question 1 Maria spends all of her income of $2,000 on food (F) and clothing (C). The prices per unit…Question 1 Maria spends all of her income of $2,000 on food (F) and clothing (C). The prices per unit are: PF = $5 and PC = $20. (a) The maximum amount of food that Maria can consume is _____. (b) The maximum number of pieces of clothing that Maria can consume is ____. (c) Therefore the intercepts of Maria’s budget line are _____ F and _____ C. (d) Graph Maria’s budget line, with F on the vertical axis and C on the horizontal axis. (e) Maria (can, cannot) __________ afford to buy a combination of 200 F and 60 C because this combination of goods is located (outside, inside, on) __________ her budget line. (f) The slope of this budget line is _________. (g) The opportunity cost of one piece of clothing is ___ units of food. h) If Maria’s income rises to $3,000, the new intercepts of her budget line are _____ F and _____ C. (i) Graph this new budget line on your graph for item (d) above. Question 2 Use the diagram attached to answer the questions that follow. (a) What change could…John Q. Public spends all of his income on gasoline and hot dogs. Draw his budget line under several conditions: a. His income is $100, and one gallon of gasoline and one hot dog each cost $2. b. His income is $150, and the two prices remain the same. c. His income is $100, hot dogs cost $2 each, and gasoline costs $2.50 per gallon.
- (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…Maria spends all of her income of $2,000 on food (F) and clothing (C). The prices per unit are: PF = $5 and PC = $20. Graph Maria’s budget line, with F on the vertical axis and C on the horizontal axis.Question 1 Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. How many tubes will he buy if the current price is £0.50 per tube? Find Andrea’s income-consumption curve for tooth paste tubes for incomes between £0 and £21, assuming a price of £1 per tube.
- Question 1 Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. In a graph, draw total utility as a function of number of toothpaste tubes, assuming that Andrea buys 1 tooth brush.Graph the budget line showing all the different combinations of good ? (drawn on the horizontal axis) and good ? (drawn on the vertical axis) that can be bought given the consumer’s total income. In the graph, indicate the y-intercept and x-intercept of the budget line.Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T) = 2ST, so MUs = 2T and MUT = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing. A. What is the equation for her budget line? Draw it (with T on the vertical axis) and label the slope and intercepts. B. What is Linda's marginal rate of substitution? Explain. C. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget line.
- Question 3a. 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.Question 3a. 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? Question iv to be answeredCourse: MicroeconomicsConsider a consumer who has income equal to 100 and who faces prices Px = 2 and Py = 1, of 2 goods, X and Y. Consumer is in equilibrium consuming basket (X*, Y*) = (20, 60). If price of Y increases and becomes Py = 2, and income increases and becomes equal to 160, which consumption basket will consumer choose in new situation? Explain and graph
