MICROECONOMICS
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ISBN: 9780134519494
Author: Acemoglu
Publisher: PEARSON
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Chapter 3, Problem 8Q
To determine
The allocation of scarce apartments near the city center.
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Julie buys food and other goods. She has an income of $400 per month. The price of food is initially $1.00 per unit. It then rises to $1.20 per unit. The prices of other goods do not change. To help Julie out, her mother offers to send her a check each month to supplement her income. Julie tells her mother, “Thanks, Mom. If you would send me a check for $50 per month, I would be exactly as happy paying $1.20 per unit as I would have been paying $1.00 per unit and not receiving the $50 from you.” Which of the following statements is true? Explain.
The increased price of food has:a) an income effect of +$50 per monthb) an income effect of -$50 per month
c) a compensating variation of +$50 per monthd) a compensating variation of -$50 per monthe) an equivalent variation of +$50 per monthf ) an equivalent variation of -$50 per month
Joseph earns $200 per week and spends his entire income on cheese which cost $5 per pound and crackers which cost $ 2 per box. Draw Josephs budget constraint. If the price of cheese increases to $8 per pound, what will happen to Josephs budget constraint?
What does a downward-sloping demand curve mean about how buyers in the market will react to a higher price?
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- Each point on the demand curve reflectsA) the highest price consumers are willing and able to pay for that particular unit of a good.B) the highest price sellers will accept for all units they are producing.C) the lowest-cost technology available to produce a good.D) all the wants of a given household.arrow_forwardComplementary goods are goods that are closely related. Choose the example below that best describes complementary goods. Sally planned to eat lunch at McDonald's, but it was closed. She decided to go to Wendy's for lunch instead. Tom went to the store to buy groceries. He had cherry soda on his list, but he decided to buy lemon-lime soda instead. The lemon-lime soda was on sale, so it was a better deal. In the spring, the demand for tennis rackets goes up. This causes the potential demand of tennis balls to also go up. December is the most popular month of the year to bake cookies. This causes the demand for butter to go up and the cost of margarine to go down.arrow_forwardin a real life, consumers do not sometimes satisfy their budget constraintarrow_forward
- When the price of chicken unexpectedly rises, many consumers choose to purchase corned beef instead.arrow_forwardHow would marginal utility and market demand be affected by a rise in the price of a contemporary good?arrow_forward# Differentiate between Normal goods and inferior goods Much appreciated ☺️arrow_forward
- Discuss it in your own understanding and then give example of the following: Utility and Demandarrow_forwardf consumers want more avocados, prices of avocados will: O increase, signaling producers to grow more. increase, causing the number of avocados traded in the market to d Ohave to decrease so consumers can afford them. decrease, signaling entrepreneurs to grow substitutes.arrow_forwardAhmed has a limited weekly income of $65, and he spends it all on cheeseburgers and J’s . Assume the price of each cheeseburger is $10 and the price of J is $5 per unit.arrow_forward
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