Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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 4, Problem 12PAA
To determine

To draw the budget line of a consumer with the help of given budget line equation.

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The Brady family have a weekly budget of €200 to be spent on Food (F) and Other Goods (OG), which are initially equally priced at €10 and €20 per unit, respectively. Given recent inflation, the government has concerns about the ability of large families to afford an adequate diet for children. Due to this, the government announces that when Food consumption exceeds 12 units, the government will subsidise food consumption so that the price per subsequent unit will be €5 for any family. With Food on the horizontal axis, show the family’s pre and post-scheme budget line. Can we definitively determine the family’s utility maximising consumption bundle as a result of the government scheme?
If the consumer thinks that (x₁,x2) is at least as good as (y₁.42) and that (y₁y2) is at least as good as (x₁,x2), we can conclude that (look at the following options)
Bart and Lisa are both optimizing consumers in the market for shirts and hats, where they pay $100 for a shirt and $50 for a hat. Bart buys 8 shirts and 4 hats, while Lisa buys 6 shirts and 12 hats. From this information, ignoring the minus sign, we can infer that Bart's marginal rate of substiution is _________ hats per shirt, while Lisa's is __________ hat's per shirt
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