Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 21, Problem 6CQQ
To determine
Whether the labor-supply curve will be upward sloping.
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Maude’s labor-supply curve slopes upward if, forMaude,a. leisure is a normal good.b. consumption is a normal good.c. the income effect on leisure exceeds thesubstitution effect.d. the substitution effect on leisure exceeds theincome effect.
Good X and good Z have a constant marginal rate of substitution (MRS) of one.
Draw the price-consumption curve when the price of good X changes. Explain your graph
Use the following data to work problems from a) to e)Income = 20$, price of cake is 4$, price of coffee is 2$
a) Calculate Amy's real income in terms of cake.
b) Calculate the relative price of cake in terms of coffee.
c) Calculate the equation for Amy's budget line (with coffee on the left side).
d) If Amy's income increases to 35$ a week and the prices of coffee and cake remain unchanged, describe the change in her budget line.
e) If the price of coffee doubles while the price of cake remains at 4$ a cup and Amy's income remains at 20$, describe the change in her budget line
Chapter 21 Solutions
Principles of Economics (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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- q7- When leisure is a normal good, the income effect from an increase in wages is manifest in a(n): Select one: a. desire to consume less leisure b. a change in preferences c. desire to consume more leisure d. a shift inwards of the budget constraintarrow_forwardUsing the model as prices goes up , so does demand , draw a graph that depicts total effect, income effect, substitution effect for rice among China's poor. Assume that price of rice rises.arrow_forwardAkua gets a research grant and her income increases to GHS 800 per month. What is the new equation of her budget line? What if income stays constant at GHS 400 and the price of Yoghurts increase to GHS10?arrow_forward
- Explain substitution and income effect by citing an examplearrow_forwardPart II: Crude oil prices quadrupled from less than $30 per barrel in 2019 to over $120 per barrel in early 2022. During this period, prices of non-oil products increased relatively less than crude oil prices (2.3% in 2019, 1.4% in 2020, and 7.0% in 2021). For the purpose of our exercise, let’s keep prices of non-oil products unchanged. Use a graph to show the income effect and substitution effect of the increase in oil prices during this period. (You should use oil on the x-axis and non-oil products on the y- axis).arrow_forwardIf all prices and income increase by 10%, then the budget line will: a. rotate around its axis. b. remain unchanged. c. be vertically parallel. d. move inward. e. move outward.arrow_forward
- A consumer earns a wage of 20 dollars per hour and has an unearned income of $100 per day. What would the consumption-leisure budget line look like? In the graph, also draw the effect of a wage cut, (including the income and substitution effects). Assume she works less after the wage change.arrow_forwardThe Marginal Rate of substitution depends on the O a. Tastes and preferences of the consumer B Price level of goods income of the consume Oc.income of the consumer O d. Availability of goodsarrow_forwardFor 1, I got c=10 and B=20. For 2, Substitution effect >> consumption of clothing increases from 10 to 10*sqr10, consumption of book decreases from 20 to 10sqr10 income effect >> the consumption of clothing increases from 10*sqr10 to 20. consumption of book increases from 10sqr10 to 20 Am i right??arrow_forward
- A consumer has $300 to spend on goods X and Y. The market prices of these two goods are Px = $15 and Py = $5. a. What is the market rate of substitution between goods X and Y? b. Illustrate the consumer’s opportunity set in a carefully labeled diagram. c. Show how the consumer’s opportunity set changes if income increases by $300. How does the $300 increase in income alter the market rate of substitution between goods X and Yarrow_forwarda) Explain by using an example why an MRS (Marginal Rate of Substitution) between two goods must equal the ratio of the price of the goods for the consumer to achieve maximum satisfaction?arrow_forwardA consumer must divide $600 between the consumption of product X and product Y. The relevant market prices are Px = $10 and Py = $40. a. Write the equation for the consumer’s budget line. b. Illustrate the consumer’s opportunity set in a carefully labeled diagram. c. Show how the consumer’s opportunity set changes when the price of good X increases to $20. How does this change alter the market rate of substitution between goods X and Y?arrow_forward
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