EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9781305465626
Author: Blinder
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 5.A, Problem 1TY
(a)
To determine
Construct a budget line at income $100 and price $2 for each unit of Taco and Hot Dogs.
(b)
To determine
Construct a budget line at income $150 and price $2 for each unit of Taco and Hot Dogs.
(c)
To determine
Construct budget line at income $100 and price $2 is for Hot Dogs and $2.50 is for Taco.
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6. You consume only coke and pasta. One day, the price of coke goes up, the price of pasta goes down, and you are just as happy as you were before the price changes.
a. Illustrate this situation on a graph.
b. How does your consumption of the two goods change? How does your response depend on income and price effects?
c. Can you afford the bundle of coke and pasta you consumed before the price changes?
Question 4
A consumer has income of $15,000. Masks costs $35 per mask, and sanitizers costs $70 per bottle.
Draw the consumer’s budget constraint (put mask on the horizontal axis). What is the slope of this budget constraint?
Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both masks and sanitizers are normal goods. Illustrate what happens if a mask is an inferior good.
The price of masks rises from $35 to $40 per mask, while the price of sanitizers is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects.
Under what circumstance(s) if any can an increase in the price of sanitizers induce a consumer to buy more of that good? Explain.
Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.
(Answers…
Question 4
A consumer has income of $15,000. Masks costs $35 per mask, and sanitizers costs $70 per bottle.
Draw the consumer’s budget constraint (put mask on the horizontal axis). What is the slope of this budget constraint?
Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both masks and sanitizers are normal goods. Illustrate what happens if a mask is an inferior good.
The price of masks rises from $35 to $40 per mask, while the price of sanitizers is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects.
Under what circumstance(s) if any can an increase in the price of sanitizers induce a consumer to buy more of that good? Explain.
Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.
Chapter 5 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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