Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 2, Problem 11PAA
To determine
To explain:
The impact on prices of RAM.
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It is common for supermarkets to carry both generic (store-label) and brand-name (producer-label) varieties of sugar and other products. Many consumers view these products as perfect substitutes, meaning that consumers are always willing to substitute a constant proportion of the store brand for the producer brand. Consider a consumer who is always willing to substitute four pounds of a generic store-brand sugar for two pounds of a brand-name sugar. Do these preferences exhibit a diminishing marginal rate of substitution between store-brand and producer-brand sugar? (Click to select) Yes No Assume that this consumer has $24 of income to spend on sugar, and the price of store-brand sugar is $1 per pound and the price of producer-brand sugar is $3 per pound. How much of each type of sugar will be purchased?Producer-brand sugar: poundsStore-brand sugar: poundsIf prices change such that the price of store-brand sugar was $2 per pound and the price of producer-brand sugar was $3 per…
It is common for supermarkets to carry both generic (store-label) and brand-name (producer-label) varieties of sugar and other products. Many consumers view these products as perfect substitutes, meaning that consumers are always willing to substitute a constant proportion of the store brand for the producer brand. Consider a consumer who is always willing to substitute four pounds of a generic store-brand sugar for two pounds of a brand-name sugar. Do these preferences exhibit a diminishing marginal rate of substitution between store-brand and producer-brand sugar? Assume that this consumer has $24 of income to spend on sugar, and the price of store-brand sugar is $1 per pound and the price of producer-brand sugar is $3 per pound. How much of each type of sugar will be purchased? How would your answer change if the price of store-brand sugar was $2 per pound and the price of producer-brand sugar was $3 per pound?
Non-linear pricing in water utilities: You are the manager of water utilities, and you are trying to determine how different water pricing schemes will affect consumption.
One option for pricing is called decreasing block pricing, where the marginal price paid decreases with quantity paid. In particular, you are considering a decreasing block schedule where consumers pay $0.20 per gallon for the first 20 gallons consumed, and then $0.10 per gallon for any additional gallons consumed. For this decreasing block pricing scheme, draw the budget constraint for a consumer that has $10 of income, where the composite good is the good on the y-axis.
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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