The diagram below shows the Total Effect (the sum of Income & Substitution Effects) when the budget line moves from BO to BI,it shows that;Substilie.EffactToralEffectO a. Price of X increase and X is Giffen good.O b. Price of X decreases and X is normal good.O c. Price of X increase and X is inferior good.Price of X incregse and X is normgl good.

The budget line shows us a combination of goods and services that an individual can afford with the…

The diagram below shows the Total Effect (the sum of Income & Substitution Effects) when the budget line moves from BO to BI, it shows that; Efant u, Toral Effect O a. Price of X increase and X is Giffen good. O b. Price of X decreases and X is normal good. O c. Price of X increase and X is inferior good. o d. Price of X increase and X is normal good.

The diagram below shows the Total Effect (the sum of Income & Substitution Effects) when the budget line moves from BO to BI, it shows that; Efant u, Toral Effect O a. Price of X increase and X is Giffen good. O b. Price of X decreases and X is normal good. O c. Price of X increase and X is inferior good. o d. Price of X increase and X is normal good.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 2SCQ: Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to...

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Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
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?
Would you expect total utility to rise or fall with additional consumption of a good? Why?
Answer the following short questions:a. Suppose that a consumer’s preferences between goods x andy are represented by the utility function u(x, y) = x^2 + 16xy + 64y^2. If these two goods have the same price, describe the optimal consumptionchoice of this consumer.b. Suppose that when the price of a good change, the incomeand substitution effects change the consumer’s demand for that goodin opposite directions.i. Is this good a normal or an inferior good? Explain.ii. Is this good a Giffen or an ordinary good? Explain.c. Is the following statement true or false? The differencebetween a monopolist’s marginal cost and its profit-maximizing price issmaller when the demand is more elastic.
c.Define a budget line d.Given that Tebogo's income is P1800 price of food is P30 and price of entertainment is P40, Draw tebogos budget line. e.Using a diagram, show waht would happen to Tebogo,s budget line if income increases from P1800 to P2100 while prices remain P330 for food and P40 for entrtainment. f.Using a diagram, show what would happen to Tebogo's budget line if income increases from P1800 to P2100 while prices remain P30 for food and P40 for entertainment.
12) Leyla consumes goods X and Y. The price of good X is Px and the price of good Y isPy, Leyla’s income is I. If both prices and Leyla’s income increases by 50%, then theA) budget constraint will be unchanged.B) slope of the budget constraint will increase.C) slope of the budget constraint will decrease.D) budget constraint will shift outward in a parallel fashion.E) None of the above .
a halving price of the prices of good A and Good B have the same effects on the budget line as doubling income. is this true or false and how woukld it look like using ana equation of a budget line
Draw a well-labeled graph that shows the substitution effect (SE), incomeeffect (IE), and total effect of good 1 and is consistent with the following: The consumerreceives $m per month and has well-behaved preferences with strictly convex indifferencecurves; the price of good 1 increases; the original utility-maximizing point is labeled at A; thenew utility-maximizing point is labeled C; the compensated budget’s utility maximizing point islabeled B; good 1 is inferior but not Giffen. Make sure to clearly state and graphically showwhether the SE, IE, and total effect of good 1 are each positive or negative. Also state if the SEor IE is higher in magnitude if possible. Good 1 needs to be on the horizontal axis.
Ques 1. Sally consumes two goods, X and Y. Her utility function is given by the expression U=3XY2. The marginal utility of X and marginal utility of Y are given by the following equations: MUX=3Y2 and MUY=6XY The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. A) Draw out Sally’s budget line. (show the points where it meets the vertical and horizontal axes) B) Determine the X,Y combination which maximizes Sally's utility, given her budget constraint. (Partial units for the quantities are possible.) [Hint: One of the ways to do this is to use the equal marginal principle to find the optimal ratio of X to Y and then use that in the budget equation]. C) How much is Sally’s utility? Now the price of X increases to $15. What is the ratio in which she will consume X and Y ?
Intialy mr. John is at equilibrium such that the last dollar spent on each of several products gives hi identical marginal utility i.e MUorange/porange=MUApple/pApple=...=MUn/pn where Mu orange =aditional utility derived from consuming one more unit of Apple ,pApple=price of a unit of Apple etc Q.how will Mr.Jhon react if the price of orange and other goods remain constant?and how can the equilibrium be restored?
Jane has a budget of $15 to spend at the local scientific store. Her two favorite items are beakers (Product X) which costs $3 and petri dishes (Peroduct Y) which costs $2. In the schedule below you can see the marginal utility for each of her favorite items. Which combination would maximize Jane's utility? X y Quantity MUx Quantity MUy 1 40 1 24 2 28 2 20 3 24 3 16 4 20 4 12 5 1 5 8 a.) 3 beakers & 3 petri dishes b.) 4 beakers & 2 petri dishes c.) 5 beakers & 1 petri dishes
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? $