Suppose you are given RM500 each month to spend on meals and sports. Each meal will cost you RM5 and each sport will cost you RM2 per time you spend. Explain with a diagram to show that you have achieve an optimum consumption. Carefully derive the bundle of meals and sports at the optimum consumption point and the intercept points in your diagram. Could you able to obtain a higher optimum consumption point if your budget remains at RM500? Explain.

Suppose you are given RM500 each month to spend on meals and sports. Each meal will cost you RM5 and each sport will cost you RM2 per time you spend. Explain with a diagram to show that you have achieve an optimum consumption. Carefully derive the bundle of meals and sports at the optimum consumption point and the intercept points in your diagram. Could you able to obtain a higher optimum consumption point if your budget remains at RM500? Explain.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 24SQ

See similar textbooks

Similar questions

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.
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 below to answer the questions that follow. (a) What change could cause the…
Suppose you had a budget of $20.00 and the prices of a burger and a slice of pizza are $5.00 and $2.00 respectively. What would be your optimal consumption bundle?
Which of the following statements is likely to be true about total utility as consumption increases? Group of answer choices Sophia receives a total utility of 5 from consuming the first burger, 10 after consuming the second, and 15 after the third. Benizir receives a total utility of 20 from consuming the first pancake, 15 after consuming the second, and 10 after the third. Jacob receives a total utility of 40 from consuming the first bowl of curry, 55 after consuming the second, and 65 after the third.
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. (Hint: put movie rentals on the X axis) a)Draw your budget line showing the different combinations of Movies that you can rent and sodas that you can purchase. b)Suppose that movie rentals turn out to be half off ($3.00). Draw your new budget line on the same graph.
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. (Hint: put movie rentals on the X axis) a) (2 points) Draw your budget line showing the different combinations of Movies that you can rent and sodas that you can purchase. b) Suppose that movie rentals turn out to be half off ($3.00). Draw your new budget line on the same graph. c) Draw the income compensated budget line d) Draw an indifference curve tangent to your original budget line at your original purchase point. e) Draw an indifference curve showing where you will purchase at the new prices F) Breakdown the shift from the original point of consumption to the new point of consumption using the income and substitution effects. Please provide a detailed explanation in addition to the graph. You will need to draw a third indifference curve. Please do e and f. If…
Suppose you have a budget of 30 to spend on two goods: pizzas and burgers. Each pizza is $5 while each burger is $10. Suppose you already purchased 6 pizzas. What is the maximum number of burgers that you can buy with the remaining funds in your budget?
A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 15 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should Multiple Choice a. decrease consumption of product X and increase consumption of product Y. b. increase consumption of product X and increase consumption of product Y. c. decrease consumption of product Y and increase consumption of product X. d. stick with the current consumption mix because it yields maximum utility.
Use the following information to answer questions 1 through 8: A student has a monthly budget of $120 to spend on either burritos, which cost $6 each, or sodas, which cost $4 each. What is the largest number of burritos that the student could afford to purchase in one month? What is the largest number of sodas the student could afford to purchase in one month?
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. 400 units of Food, 100 units of Clothing (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.
You have the Cobb-Douglas utility function u(x,y) = xy over apples (x) and plums (y) and you have $120 budget to spend and can carry at most 480 ounces in weight in your backpack going back to the dorm. Each apple costs $1 and weighs 8 ounces, and each plum costs $3 and weighs 4 ounces. You can only leave the store with a bundle of fruits you can afford and carry. (a) Drawing the relevant lines, intercepts, marking the points and hence identifying the feasible set of bundles, calculate the optimal bundle. (b) Forget about (a). If you were to choose a backpack before going on this shopping trip, for the weight constraint not to be an issue for you, how many ounces of weight capacity would you need for your backpack? HINT: That is, for this weight capacity of the backpack, you’d be able to carry the best bundle you can afford, i.e, the weight constraint is not binding for your decision. ( c) Forget about (b). In (a), just before going out for shopping with your backpack to buy the…
A student has a monthly budget of $120 to spend on either burrito, which cost $6 each, or sodas, which cost $4 each.Draw the student's budget constraint. Put burritos on the x-axis and sodas on the y-axis. Which combinations of burritos and sodas are unaffordable--those to the left of the line in the graph or those above the line in the graph? Why? Which combinations would leave some budget unspent - those to the left of the line in the above graph or those to the right of the line in the above graph?