EBK ECONOMICS TODAY
18th Edition
ISBN: 8220100663253
Author: Miller
Publisher: PEARSON
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Chapter 2, Problem 1FCT
To determine
The reasons behind the comparative shift in income earned from husbands to wives since more females than males now obtain college degrees.
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Discuss the possible substitution effect and the income effect of an increase in income on leisure time.
The following graph input tool shows the daily demand for hotel rooms at the Oceans Hotel and Casino in Atlantic City, New Jersey. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool.
Demand FactorInitial ValueAverage American household income$50,000 per yearRoundtrip airfare from Pittsburgh (PIT) to Atlantic City (ACY)$250 per roundtripRoom rate at the Meadows Hotel and Casino, which is near the Oceans$250 per night
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $100 per room per night.
If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Oceans____ from
rooms per night to______rooms…
Determine whether the following statements are true, false, or uncertain. Please illustrate and explain your answer.
If leisure is a normal good, then an individual's labor supply curve must be positively sloped.
If leisure is an inferior good, then an individual's labor supply curve must be negatively sloped.
Chapter 2 Solutions
EBK ECONOMICS TODAY
Ch. 2 - Prob. 2.1LOCh. 2 - Prob. 2.2LOCh. 2 - Prob. 2.3LOCh. 2 - Prob. 2.4LOCh. 2 - Prob. 2.5LOCh. 2 - Prob. aFCTCh. 2 - Prob. bFCTCh. 2 - Prob. cFCTCh. 2 - Prob. dFCTCh. 2 - Prob. 1CTQ
Ch. 2 - Prob. 2CTQCh. 2 - Prob. 1FCTCh. 2 - Prob. 2FCTCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - Prob. 18P
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- Complete the following. Note that several factors are listed in the book. For each factor, be sure to tell how it will shift the curve. Name some factors that can cause a shift in the demand curve in markets for goods and services. Name some factors that can cause a shift in the supply curve in markets for goods and services.arrow_forwardThe following graph input tool shows the daily demand for hotel rooms at the Big Winner Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. Demand Factor Initial Value Average American household income $50,000 per year Roundtrip airfare from San Francisco (SFO) to Las Vegas (LAS) $250 per roundtrip Room rate at the Lucky Hotel and Casino, which is near the Big Winner $200 per night Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.arrow_forwardDiscuss the possible substitution effect and the income effect of an increase in income on leisure time.arrow_forward
- Suppose income-tax rates are increased and as a result consumers experience a decrease in income earned from working. Basic microeconomics predicts that, Demand for normal goods will rise. Demand for inferior goods will rise. Demand for normal goods will fall. Demand for inferior goods will rise and demand for normal goods will fall.arrow_forwardThe following graph input tool shows the daily demand for hotel rooms at the Big Winner Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. Demand Factor Initial Value Average American household income $40,000 per year Roundtrip airfare from New York (JFK) to Las Vegas (LAS) $250 per roundtrip Room rate at the Lucky Hotel and Casino, which is near the Big Winner $250 per night Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. For each of the following scenarios, begin…arrow_forwardIn the theory of consumer, we argued that the utility is ordinal, that is, utility number does not have any intrinsic meaning other than to give a preference ordering among consumption bundles. In other words, any increasing monotone transformation of a utility function represents the same preference, hence the spacing between indifference curves does not have any significance. Explain why in the theory of producer, the production function and the corresponding isoquant is a cardinal property, that is, the number itself has an intrinsic meaning. And explain the relationship between returns to scale and space between isoquants.arrow_forward
- Susan obtains utility by consuming carrots C and enjoying leisure L. Suppose that she has a daily non-wage income Y of £100 and is paid a fixed hourly wage rate of £10 for every hour she works in a local coffee shop. Assume that Susan is a utility maximiser and is free to choose x hours of work per day where 0 ≤ x ≤ 10. Assume also that the unit price of C is £1. a) Suppose that L is measured on the horizontal axis and C on the vertical axis. Use these axes to draw the set of all C and L combinations that Susan can choose from. Write down Susan’s budget equation. b) Suppose that Susan’s preferences over carrots and leisure are expressed by the following utility function: U(C,L) = min{C, 10L}. Calculate Susan’s optimal consumption bundle, both algebraically and graphically. Calculate the value of MRS at the optimal choice. c) Suppose instead that Susan’s preferences are such that indifference curves in the L-C space are strictly convex to the origin, and that she chooses to work 5…arrow_forwardSuppose that the cost of living increases, thereby reducing the purchasing power of your income. If your money wage doesn’t increase, you may work more hours because of this cost-of-living increase. Is this response predominantly an income effect or a substitution effect? Explain.arrow_forwardFor each situation below, state whether it is an example of the income effect changing quantity demanded or an example of a change in income shifting demand. a. The mean income in Detroit rises and people purchase more homes. b. The price of frozen pizza decreases, making frozen pizza more popular among college students. c. A recession forces many people out of work and more people purchase ramen noodles than before. d. An increase in the price of game consoles decreases sales, as fewer people can afford them.arrow_forward
- What is the difference between deterministic and random variations in the pattern of demands? Provide an example of a real problem in which predictable variation would be important and an example in which random variation would be important.arrow_forwardWhen deriving labour supply, we assumed that the substitution effect dominated the income effect. What impact would there be on labour supply if this was not the case? Briefly investigate how such a change could theoretically affect the imposition of a minimum wage. (Your answer is likely to benefit if it is supported by a diagram.)arrow_forwardAn individual's decision to supply her labor or to spend her time in leisure activity is known as the labor-leisure tradeoff. True or false?arrow_forward
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