ob can buy two kinds of goods, food and clothing. He earns £400 per week. Food items cost £4 each, and items of clothing cost £20 each. Q1. Draw a diagram showing her budget constraint and explain clearly what this constraint represents in terms of feasible consumption of food (on the x axis) and clothing (on the y axis). Q2. Explain what would happen to feasible consumption if Zadie’s income were to increase. Q3. Explain what it means to say that Bob’s preferences show a diminishing marginal rate of substitution of food for clothing. What is the intuitive justification for diminishing marginal rates of substitution?
ob can buy two kinds of goods, food and clothing. He earns £400 per week. Food items cost £4 each, and items of clothing cost £20 each. Q1. Draw a diagram showing her budget constraint and explain clearly what this constraint represents in terms of feasible consumption of food (on the x axis) and clothing (on the y axis). Q2. Explain what would happen to feasible consumption if Zadie’s income were to increase. Q3. Explain what it means to say that Bob’s preferences show a diminishing marginal rate of substitution of food for clothing. What is the intuitive justification for diminishing marginal rates of substitution?
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section6.A: Appendix: Indifference Curves And Utility Maximization
Problem 2AQ
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Bob can buy two kinds of goods, food and clothing. He earns £400 per week. Food items cost £4 each, and items of clothing cost £20 each.
Q1.
Draw a diagram showing her budget constraint and explain clearly what this constraint represents in terms of feasible consumption of food (on the x axis) and clothing (on the y axis).
Q2.
Explain what would happen to feasible consumption if Zadie’s income were to increase.
Q3.
Explain what it means to say that Bob’s preferences show a diminishing marginal rate of substitution of food for clothing. What is the intuitive justification for diminishing marginal rates of substitution?
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