u (x₁, x₂) = x²x² If the price of good 1 is $6/unit, the price of good 2 is $8/unit, and income $118... What is this person's optimal consumption level for good 1?
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- Q19 Suppose a consumer can purchase only two goods: pasta and rice. Let the quantity of pasta be measured on the vertical axis and the quantity of rice be measured on the horizontal axis. If the price of pasta falls, with no change in the price of rice or in the consumer's money income, then the budget line for the consumer will rotate... a. Outward parallel to the existing budget line. b. Toward the origin and become flatter. c. Away from the origin and become steeper. d. Away from the origin and become flatter. e. Toward the origin and become steeper.Anthony spends all his income on two goods, X and Y and his tastes don't change between 2008 and 2009. The prices he paid and the quantities he consumed in 2008 are as follows: PX = 15, X = 20, PY = 25 and Y = 30. Suppose the prices in 2009 are PX = 6 and PY = 30, and his income in 2009 is €1,020, Anthony is as well off in 2009 as he is in 2008 Anthony is better off in 2009 than in 2008 Anthony is better off in 2008 than in 2009 There is not enough information to answer this questionThe reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is: a. the product is now relatively more expensive than it was before. b. other products are now relatively more expensive than they were before. c. the real income of the consumer has been increased. d. the real income of the consumer has been decreased
- Janelle spends all of her income on songs from iTunes ($1 each) and apps ($5 each) for her iPhone. If she makes her best affordable choice, she purchases 20 songs and 4 apps, what is her real income in terms of apps?Suppose the household wants to consume equal amounts in two periods. She earns $100 in the first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on borrowing is 10%. What is her optimal consumption? Be sure to explain why you choose to save or borrow.Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8 respectively. How much is the consumer’s income?
- If the ratio of consumption C to income Y is c, then the ratio of income to consumption is: a. 1/(1+c) b. 1-c c. 1/c d. 1/(1-c)A typical consumer's "leisure basket" in the base year 2019 is as follows: 20 movie tickets $15.00 each 4 theme park tickets $80.00 each 30 swimming passes $10.00 each 2 interstate holidays $400 each 1 international holiday $2000 each The closure of international borders decreases demand for international holidays in 2020. This causes interstate holidays to rise in price to $800 each. The price of other items in the leisure basket are unchanged. a. Calculate the change (as a percentage) in the "leisure index" between 2019 and 2020. b. Suppose consumer preferences change in 2020 and they are completely indifferent between two interstate holidays and one international holiday. In this situation, how large is the substitution bias in the "leisure index"? c. Explain how biases in the "leisure index" create a difference between the price changes consumers experience and the price changes described by the "leisure index".What happens to the original budget line if the income of the consumer falls by 25%? (i.e., Will there be a change in the slope and/or intercepts of the original budget line? If yes, what are those changes?) Draw the new budget line after the fall in income.
- Consider a consumer who wants to consume only two commodities and has an income of $250. Assume the price of good 1 is $25 per unit and the price of good 2 is $50 per unit. Now, inflation causes the price of good 1 to increase to $30 per unit, while the price of good 2 increases to $60 per unit. On the other hand, the consumer also gets a raise of $110 (so her new income is $360). What will happen to the consumption bundles (x₁, x₂)? How much units will increase for both x₁ and x₂?The income of a consumer is $40, the price of A is $5, and the price of B is $2. If the quantity of A is measured vertically, then the slope of the budget line is?Akua gets a research grant and her income increases to GHS 800 per month. What is the new equation of her budget line? What if income stays constant at GHS 400 and the price of Yoghurts increase to GHS10?
