Using the income amount you just computed, complete the following table by finding the price of a scone when BC1 represents Alyssa's budget constraint and when BC2 represents her budget constraint. Then indicate the quantity of scones consumed in each of those scenarios. Price Consumption When Alyssa's budget constraint is... (Dollars per scone) (Scones) BC1 BC2 Given the price-quantity combinations from the preceding table, use the blue line (circle symbol) to plot Alyssa's demand for scones on the following graph. Hint: Assume that Alyssa's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blue line on the following graph so that it passes through these two points.
Using the income amount you just computed, complete the following table by finding the price of a scone when BC1 represents Alyssa's budget constraint and when BC2 represents her budget constraint. Then indicate the quantity of scones consumed in each of those scenarios. Price Consumption When Alyssa's budget constraint is... (Dollars per scone) (Scones) BC1 BC2 Given the price-quantity combinations from the preceding table, use the blue line (circle symbol) to plot Alyssa's demand for scones on the following graph. Hint: Assume that Alyssa's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blue line on the following graph so that it passes through these two points.
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.5P
Related questions
Question
Transcribed Image Text:10. Deriving demand from an indifference map
Alyssa lives in Dallas and enjoys drinking lattes and eating scones. The price of a latte is held constant at $4 throughout this problem.
On the following graph, the purple curves (I and I2) represent two of Alyssa's indifference curves. The lines BC, and BC2 show two budget
constraints. Points X and Y show Alyssa's optimum consumption bundles subject to these budget constraints.
18
16
14
12
Y
10
8
BO
+
0 2
4
8.
10
14
16
18
SCONES
Given the preceding graph and knowing the price of a latte is $4, Alyssa's available income for lattes and scones is $
20
12
20
2)
LATTES
Transcribed Image Text:Given the preceding graph and knowing the price of a latte is $4, Alyssa's available income for lattes and scones is $
Using the income amount you just computed, complete the following table by finding the price of a scone when BC1 represents Alyssa's budget
constraint and when BC2 represents her budget constraint. Then indicate the quantity of scones consumed in each of those scenarios.
Price
Consumption
When Alyssa's budget constraint is...
(Dollars per scone)
(Scones)
BC1
BC2
Given the price-quantity combinations from the preceding table, use the blue line (circle symbol) to plot Alyssa's demand for scones on the following
graph.
Hint: Assume that Alyssa's demand for scones is a straight line. You should derive two points on the demand curve from the preceding graph. Then
place the blue line on the following graph so that it passes through these two points.
10
9.
Demand
8.
7
2
1
+
4
8
10
12
14
16
18
QUANTITY (Scones)
20
4.
3.
PRICE (Dollars per scone)
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