Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 21, Problem 5PA
Subpart (a):
To determine
The budget constraint of a person.
Subpart (b):
To determine
The budget constraint of a person.
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Students have asked these similar questions
Eric buys only milk and cookies. In year 1, Eric earns $90, milk costs $2 per quart, and cookies cost $3 per dozen. Use the green line (triangle symbol) to draw Eric's budget constraint on the following graph.
Now suppose that all prices increase by 10 percent in year 2 and that Eric's salary increases by 10 percent as well.
Use the blue line (circle symbol) to draw Eric's new budget constraint on the preceding graph.
True or False: Eric will consume more milk and fewer cookies in year 2 than in year 1.
True
False.
Now suppose Andrew’s income increases by 50%: That is, he has 50% more money to spend than he did before.
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On the previous graph, use the blue line (circle symbols) to plot Andrew's new budget constraint.
Suppose that the price of commodity Y is $1 per unit while the price of commodity X is $2 per unit and suppose that an individual’s money income is $16 per time period and is all spent on X and Y. (a) Draw the budget constraint line for this consumer and explain the reason for the shape and the properties of the budget constraint line
Chapter 21 Solutions
Principles of Microeconomics (MindTap Course List)
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1CQQCh. 21 - Prob. 2CQQCh. 21 - Prob. 3CQQCh. 21 - Prob. 4CQQCh. 21 - Prob. 5CQQCh. 21 - Prob. 6CQQ
Ch. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QRCh. 21 - Prob. 7QRCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PA
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- Why does a change in income cause a parallel shift in the budget constraint?arrow_forwardMrs. Rochester earns $4500 a week and spends her entire income on computers andpastries, since these are the only two items that provide her utility. Furthermore, Mrs.Rochester insists that for every computer she buys, she must also buy a pastry. A) Suppose the price of pastries increases to $20 and income decreases to $3200. Whatis the new algebraic equation for Mrs. Rochester’s budget constraint? Show theimpact of the new budget line relative to the original budget line. B) What would be the new marginal rate of substitution that corresponds to theoptimal consumption choice? Interpret the marginal rate of substitution. D) Assume for this question only that when the price of computers decreases, less ofthat good is demanded. Illustrate the income and substitution effect of this pricedecrease.arrow_forward
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