MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 17PAA
To determine
The graphical representation of budget set when a company offers a frequent buyer program.
Expert Solution & Answer
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Students have asked these similar questions
The Einstein Bagel Corp. has used a frequent buyer program whereby a consumer receives a stamp each time she purchases one dozen bagels for $6. After a consumer accrues 10 stamps, she receives one dozen bagels free. This offer is an unlimited offer, valid throughout the year. The manager knows her products are normal goods. Given this information, construct the budget set for a consumer who has $200 to spend on bagels and other goods throughout the year.
Question 6
Ā Ā A consumer spends all of her income on two goods, coffee and doughnuts. She buys coffee at 25 cents per unit with a total utility of 800 and a marginal utility of 12. Ā Doughnuts are purchased at 75 cents a unit with a total utility of 200 and a marginal utility of 24. Ā To increase her total utility, the consumer should:Ā Ā Ā Ā Ā Ā Buy more coffee and less doughnutsĀ Ā Ā Ā Ā Ā Buy more of both goodsĀ Ā Ā Ā Ā Ā Do nothing. Ā She is currently maximizing utility with her limited budget.Ā Ā Ā Ā Ā Ā Buy less of both goodsĀ Ā Ā Ā Ā Ā Buy more doughnuts and less coffee.
The Einstein Bagel Corp. offers a frequent buyer program
whereby a consumer receives a stamp each time she
purchases one dozen bagels for $6. After a consumer
accrues 10 stamps, she receives one dozen bagels free.
This offer is an unlimited offer, valid throughout the year.
The manager knows her products are normal goods. Given
this information, construct the budget set for a consumer
who has $200 to spend on bagels and other goods
throughout the year. Does Einstein's frequent buyer
program have the same effect on the consumption of its
bagels that would occur if it simply lowered the price of
one dozen bagels by 3 percent? Explain graphically. Initial
Budget Line Budget Line with 3% discount Budge line
with frequent buyer program Do not need to have the
calculations, show graphically Income spent on other
goods on vertical axis of graph, Quantity of Bagels
[dozens] on horizontal axis of graph
Chapter 4 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
Knowledge Booster
Similar questions
- The Einstein Bagel Corp. offers a frequent buyer program whereby a consumer receives a stamp each time she purchases one dozen bagels for $6. After a consumer accrues 10 stamps, she receives one dozen bagels free. This offer is an unlimited offer, valid throughout the year. The manager knows her products are normal goods. Given this information, construct the budget set for a consumer who has $200 to spend on bagels and other goods throughout the year. Does Einsteinās frequent buyer program have the same effect on the consumption of its bagels that would occur if it simply lowered the price of one dozen bagels by 3 percent? Explain.arrow_forwardThis week, you have gone to two parties. Assume the total utility you gained from these parties is 100 utils. Then, you go to a third party, and your utils. Given the law of diminishing marginal utility, your marginal 120 utils. total utility rises to 110 utils. The marginal utility of the third party is utility from a fourth party this week will be 10 utils. Total utility after four parties will bearrow_forwardthis week you have gone to two parties. assume the total utility you gained from these parties is 100 utils. then you go to a third party, and your total utility rises to 110 utils. what is the marginal utility of the third party attended per week? given the law of diminishing marginal utility, what will happen to total utility and marginal utility when you go to a fourth party this week?arrow_forward
- A student has a monthly budget of $120 to spend on either burritos, which cost $6 each, orsodas, which cost $4 each.What is the largest number of burritos that the student could afford to purchase in onemonth?What is the largest number of sodas the student could afford to purchase in one month? Ā Draw the student's budget constraint. Put burritos on the x-axis and sodas on the y-axis.arrow_forwardMany apartment-complex owners are installing water meters for each apartment and billing the occupants according to the amount of water they use. This is in contrast to the former procedure of having a central meter for the entire complex and dividing up the water expense as part of the rent. Where individual meters have been installed, water usage has declined 10 to 40 percent. Explain that drop, referring to price and marginal utility.arrow_forwardJeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round-trip cost of $2 in gasoline money. He has a total of $10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6,figureoutthepointsonJeremyāsconsumptionchoicebudgetconstraint(itmaybehelpfultodoasketch) and identify his utility-maximizing point. 3. Explain all the reasons why a decrease in a product's price would lead to an increase in purchases. 4. Asacollegestudentyouworkatapart-timejob,butyourparentsalsosendyouamonthlyāallowance.ā Suppose onemonthyourparentsforgottosendthecheck.Showgraphicallyhowyourbudgetconstraintisaffected.Assuming you only buy normal goods, what would happen to your purchases of goods?arrow_forward
- In the economy of Queensland, two products (Sta and Star) are prominent due to their quality and durability. At the price of GHČ¼ 30 for Sta, 5,000 quantities of Sta are demanded. Stonewall, a banker lives in this economy and earns a weekly income of GHČ¼ 2,000. At this income level, Stonewall consumes 100 quantities of Star monthly. The price of Sta increases by 50%, now 4,000 quantities of Sta are demanded. At the initial price of Sta, 1000 quantities of Star were demanded but at the new price of Sta, 3,000 quantities of Star are demanded. Stonewall attains a professional qualification thus his weekly income increases by 20%, at the new income level; he consumes 200 quantities of Star monthly.a) Determine the Own Price Elasticity of Demand for Sta and interpret your answer?b) Determine the Cross Price Elasticity of Demand for both products and interpret the relationship between the two products?Ā c) Determine the monthly Income Elasticity of Demand for Star and explain the nature ofā¦arrow_forwardBrenda wants to buy new car and has a budget of $25,000. She has just found a magazine that assigns each car an index for styling and an index for gas mileage. Each index runs from 1 to 10, with 10 representing either the most styling or best gas mileage. While looking at the list of cars, Brenda observes that on average, as the style index increases by one unit, the price of the car increases by $6,250. She also observed that as the gas-mileage index rises by one unit, the price of the car increases by $5,000. Illustrate the various combinations of style (S) and gas mileage (G) that Brenda could select with her $25,000 budget. Using the line drawing tool, illustrate Brenda's budget line. Label this line 'Budget Line'. Carefully follow the instructions above, and only draw the required object. Suppose Brenda's preferences are such that she always receives two times as much satisfaction from an extra unit of styling as she does from gas mileage. What type of car will Brenda choose?ā¦arrow_forwardUpon graduating from UT this May, you take on a management position working at UtMax theater. You will consider the utility of seeing performance over 1 month, and suppose that at a regular price of $$$ per ticket (my assigned ticket price is 145), customers will see no performance, however with the price reduced by $5, customers will see one performance per month and when reduced by $10, customers will see two performances. As long as the number performances, x, is small, your demand function for performance can be modeled by p=D(x). Write down your demand function.arrow_forward
- This week you have gone to two parties. Assume the total utility you gained from these parties is 100 utils. Then you go to a third party, and your total utility rises to 110 utils. What is the marginal utility of the third party attended per week? Given the law of diminishing marginal utility, what will happen to total utility and marginal utility when you go to a fourth party this week? Consider the table below which lists John's marginal utility schedule for steak and hamburger meals: Steak meals per month MU of steak meals Price per steak meal Hamburger meals per month MU of hamburger meals Price per hamburger meal 1 20 $10 1 15 $5 2 15 10 2 8 5 3 12 10 3 6 5 4 10 10 4 4 5 5 8 10 5 2 5 Given a budget of $45, how many steak and hamburger meals will James buy per month to maximize his total utility? What is the total utility realized?arrow_forwardIf you had a vacation budget of $3000 to take vacation(s) this fall, use utility analysis theory to predict which vacation that you would participate in this fall. You need to explain why you would take this vacation instead of another one that you were considering. Assume that you must take the vacation or all life on Earth would perish. I made that last assumption to prevent you from saying that you would just spend it to pay down bills or put it in savings. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardDescribe the point at which a consumer maximizes utility.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337613040/9781337613040_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337613064/9781337613064_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337617406/9781337617406_smallCoverImage.gif)