Microeconomics
2nd Edition
ISBN: 9781259813337
Author: KARLAN, Dean S., Morduch, Jonathan
Publisher: Mcgraw-hill Education,
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Question
Chapter 1, Problem 2PA
To determine
(a)
To find the apartment which is under budget.
To determine
(b)
To find the apartment which is under budget.
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Ebrima gets $3 per month as an allowance to spend any way he pleases. Because he likes only peanut butter and jelly sandwiches, he spends the entire amount on peanut butter (at $.05 per ounce) and jelly (at $.10 per ounce). Bread is provided free of charge by a concerned neighbor. Ebrima is a picky eater and makes his sandwiches with exactly 1 ounce of jelly and 2 ounces of peanut butter. He is set in his ways and will never change these proportions.
How much peanut butter and jelly will Ebrima buy with his $3 allowance in a week?
Suppose the price of jelly were to rise to $.15 per ounce. How much of each commodity would be bought?
By how much should Ebrima’s allowance be increased to compensate for the rise in the price of jelly in part b?
Graph your results of part a through part c.
In what sense does this problem involve only a single commodity—peanut butter and jelly sandwiches? Graph the demand curve for this single commodity.
Discuss the results of this problem…
A common marketing tactic among many liquor stores is to offer clientele quantity (or volume) discounts. For instance, the second-leading brand of wine exported from Chile sells in the United States for $15 per bottle if the consumer purchases up to eight bottles. The price of each additional bottle is only $8. If a consumer has $200 to divide between purchasing this brand of wine and other goods, graphically illustrate how this marketing tactic affects the consumer's budget set if the price of other goods is $1. Assuming a consumer has standard indifference curves (i.e.,resembling those in Figure 4-2), will she ever purchase exactly 8 bottles of wine?
. Jenna and Walter are on a road trip across the country. They both say that they get 25 utils from peanut butter sandwiches and 25 utils from trail mix. Knowing this, we can conclude that Jenna a. gets the same satisfaction from peanut butter sandwiches that Walter does. b. gets more satisfaction from trail mix than Walter does. c. gets more satisfaction from trail mix than from peanut butter sandwiches. d. and Walter are both indifferent between other food than peanut butter sandwiches or trail mix. e. and Walter will consume the same amount of peanut butter sandwiches and trail mix on the road trip.
Chapter 1 Solutions
Microeconomics
Ch. 1 - Prob. 1RQCh. 1 - Prob. 2RQCh. 1 - Prob. 3RQCh. 1 - Prob. 4RQCh. 1 - Prob. 5RQCh. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 8RQCh. 1 - Prob. 9RQCh. 1 - Prob. 10RQ
Ch. 1 - Prob. 11RQCh. 1 - Prob. 12RQCh. 1 - Prob. 13RQCh. 1 - Prob. 14RQCh. 1 - Prob. 15RQCh. 1 - Prob. 16RQCh. 1 - Prob. 17RQCh. 1 - Prob. 18RQCh. 1 - Prob. 19RQCh. 1 - Prob. 20RQCh. 1 - Prob. 21RQCh. 1 - Prob. 22RQCh. 1 - Prob. 23RQCh. 1 - Prob. 24RQCh. 1 - Prob. 1PACh. 1 - Prob. 2PACh. 1 - Prob. 3PACh. 1 - Prob. 4PACh. 1 - Prob. 5PACh. 1 - Prob. 6PACh. 1 - Prob. 7PACh. 1 - Prob. 8PACh. 1 - Prob. 9PACh. 1 - Prob. 10PACh. 1 - Prob. 11PACh. 1 - Prob. 12PACh. 1 - Prob. 13PACh. 1 - Prob. 14PACh. 1 - Prob. 15PA
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- Suppose that the price of commodity Y is $ 20 per unit while the price of commodity X is $ 15 per unit and suppose that an individual’s money income is $ 100 per period and is all spent on X & Y. Draw the budget constraint line for this consumer at the initial point. If the price of X decreases to $10, incorporate BL2 showing change in the Budget line.arrow_forwardKimiko is planning a party to celebrate her birthday. She has decided to serve sushi and yakitori meat skewers. Each serving of sushi is $8 and each yakitori skewer is $2. Kimiko has $240 to spend on the party, and her budget line is shown below. Her friend Barry thinks there will not be enough food, so he gives Kimiko $80 more to spend on the party (she now has $320). Show Kimiko\'s new budget line in the graph below and answer the question.arrow_forwardJohn works at Frito-Lay distribution center. He is paid $20 per hour and can choose how many hours he can work a week. However, if he works 30 hours per week he is eligible for health insurance and other benefits worth $100 to him. Which of the graphs below show John’s budget constraint in this scenario?arrow_forward
- Suppose that the price of commodity Y is $2 per unit while the price of commodity X is $4 per unit and suppose that an individual’s money income is $100 per time period and is all spent on X and Y. Draw the budget constraint line for this consumer at the initial point. 2.If the price of Y decreases to $3, incorporate BL2 showing change in the Budget line.arrow_forwardSuppose 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…arrow_forwardAssuming the two good case. When a person is attempting to maximize utility and the price of one of the two goods increases, then: The budget constraint will contract (rotate towards the origin), shifting the budget line inward indicating more choices are now affordable and a lower utility level is now possible. The budget constraint will contract (rotate towards the origin), shifting the budget line outward indicating fewer more are now affordable and a higher utility level is now possible. The budget constraint will contract (rotate towards the origin), shifting the budget line inward indicating fewer choices are now affordable and a lower utility level is now possible.arrow_forward
- Ebrima gets $3 per month as an allowance to spend any way he pleases. Because he likes only peanut butter and jelly sandwiches, he spends the entire amount on peanut butter (at $.05 per ounce) and jelly (at $.10 per ounce). Bread is provided free of charge by a concerned neighbor. Ebrima is a picky eater and makes his sandwiches with exactly 1 ounce of jelly and 2 ounces of peanut butter. He is set in his ways and will never change these proportions. How much peanut butter and jelly will Ebrima buy with his $3 allowance in a week? Suppose the price of jelly were to rise to $.15 per ounce. How much of each commodity would be bought? By how much should Ebrima’s allowance be increased to compensate for the rise in the price of jelly in part b? Graph your results of part a through part c. In what sense does this problem involve only a single commodity—peanut butter and jelly sandwiches? Graph the demand curve for this single commodity. Discuss the results of this problem in terms of…arrow_forwardSuppose 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.arrow_forwardSuppose that there are three beachfront parcels of land available for sale in Astoria, and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the selling price of each is $745,000. The following table states each person's willingness and ability to purchase a parcel. Willingness and Ability to Purchase (Dollars) Alyssa 720,000 Brian 690,000 Crystal 680,000 Nick 900,000 Rosa 810,000 Tim 770,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. Alyssa Brian Crystal Nick Rosa Tim Assume that the three beachfront parcels are sold to the people you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a price of $732,500. This fourth parcel _____________be sold…arrow_forward
- Assuming the two good case. When a person is attempting to maximize utility and income increases, then: a. The budget constraint expands, shifting the budget line outward indicating more choices are now affordable and a higher utility level is now possible. b. The budget constraint contracts, shifting the budget line outward indicating more choices are now affordable and a higher utility level is now possible. c. The budget constraint expands, shifting the budget line inward indicating more choices are now affordable and a lower utility level is now possible. d. The budget constraint contracts, shifting the budget line outward indicating more choices are now affordable and a lower utility level is now possible.arrow_forward(18 points) 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. Show all calculations. (Hint: put movie rentals on the X axis) (2 points) Draw your budget line showing the different combinations of Movies that you can rent and sodas that you can purchase. (2 points) Suppose that movie rentals turn out to be half off ($3.00). Draw your new budget line on the same graph. (4 points) Draw the income compensated budget line and show the calculation for the income compensated budget line (2 points) Draw an indifference curve tangent to your original budget line at your original purchase point. (2 points) Draw an indifference curve showing where you will purchase at the new prices (6 points) Breakdown the shift from the original point of consumption to the new point of consumption using the income and substitution effects. Please provide a…arrow_forwardSuppose 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.arrow_forward
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