Principles of Macroeconomics
6th Edition
ISBN: 9780073518992
Author: Robert H. Frank, Ben Bernanke Professor, Kate Antonovics, Ori Heffetz
Publisher: McGraw-Hill Education
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Chapter 1, Problem 10P
To determine
Explain which university has a higher food consumption.
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Suppose the campus dining facility at Mines Market offers weekend meals for the Mines community. The following table shows your willingness to pay for each additional meal during a typical weekend.
Meal
Willingness to Pay
for this Meal
1
$12
2
8
3
6
4
4
5
2
6
0
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The city debates about how to attract more people to dine out in Sydney
Nick is from sydney. Has standard strictly convex preferences over restaurant meals and other goods.
Dines out 4 times a month and spends $40 per meal.
Spends $600 on Other goods (OG) at $1 per unit of OG
Council is going to assist Nick to eat out more.
a) Suggestion to give nick 4 meal vouchers per month, voucher is for one meal at $40 (Cannot be exchanged, sold or cashed) Must be spent on meals and not other goods. Draw budget constraint after receiving vouchers, put OG on the horizontal axis.
What will happen to Nick’s consumption after receiving said vouchers (meals and OG are both normal goods)
b)Alternative Suggestion to give Nick $160 in a month instead of 4 x $40 meal vouchers in a month, nick can buy whatever he wants with this money. Draw the new budget constraint under this alternative. What will happen to Nick’s consumption if he receives an extra $160 (meals and OG are both normal goods)
c)…
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Principles of Macroeconomics
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