Principles of Microeconomics (12th Edition)
12th Edition
ISBN: 9780134078816
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 6, Problem 3.1P
(a)
To determine
How the consumer’s demand for costumes concert affects by decreasing the air travel price.
(b)
To determine
Income and substitution effect of trip.
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Aria consumes only two goods, food and clothing. The marginal utility of the last dollar she spends on food is 12, and the marginal utility of the last dollar she spends on clothing is 9. The price of food is $1.20/unit, and the price of clothing is $0.90/unit. Is Aria maximizing her utility?
Brenda wants to buy a new car and has a budget of $24,000. She has just
found a magazine that assigns each car an index for styling and an index for gas
mileage. Each index runs from 0 to 12, with 12 representing either the most
styling or the 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 $2,000. She also observes that as the gas-mileage index
rises by one unit, the price of the car increases by $4,000.
(a) Illustrate (for yourself) the various combinations of gas mileage (G) and style
(S) that Brenda could select with her $24,000 budget. Place gas mileage on the
horizontal axis.
• Her budget line is given by 4,000*G +
[ Select ]
*S=
[ Select ]
• The X-intercept of her budget line is equal to
[ Select ]
• The Y-intercept of her budget line is equal to
[ Select ]
Digital
Apps per
Period
0
1
2
3
4
5
Total Utility of
Digital Apps
per
Period (utils)
which
0
50.0
95.0
135.0
171.5
200.0
Marginal
Utility (utils)
50.0
45.0
40.0
36.5
28.5
Marginal Utility Portable
per Dollars Spent Power Banks
(price = $5.97)
per Period
|
8.4
7.5
6.7
6.1
4.8
0
1
GTA W N
3
4
5
Total Utility of
Portable Power
Banks per
Period (utils)
0
25
47
65
80
89
Marginal
Utility (utils)
25
22
18
15
9
Marginal Utility
per Dollars Spent
(price = $2.70)
9.3
8.1
6.7
5.6
3.3
Consider the table above. Suppose the consumer's income is $26. Does the consumer spend all of her income if she purchases the optimal quantities of digital apps and portable power banks?
The optimum quantity of digital apps purchased is and the optimum quantity of portable power banks purchased is. (Enter your responses as whole numbers.)
Spending on digital apps is $ and spending on portable power banks is $. (Enter your responses rounded to one decimal place.)
Thus, total spending at the consumer optimum is $
the…
Chapter 6 Solutions
Principles of Microeconomics (12th Edition)
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