Connect 1-semester Access Card For Microeconomics
2nd Edition
ISBN: 9780077491697
Author: Whinston, Michael, BERNHEIM, B. Douglas
Publisher: McGraw-Hill Education
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Chapter 6, Problem 4DQ
To determine
Explain the given statement.
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Suppose that a consumer perceives X and AOG (all other goods) to be perfect (one-for-one) substitutes.
The consumer has an income of $100 and the price of x is 80 cents. If the price of x rises to 1.20, what is the resulting change in consumer surplus?
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Explain in detail the compensatory variation, equivalent variation and consumer surplus, taking into account the inferior goods situation, using graphs.
What would consumer surplus be?
Chapter 6 Solutions
Connect 1-semester Access Card For Microeconomics
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- Marcia spends her money on tee and biscuits and sugar, which she sees as perfect complements. She eats two biscuits with every cup of tea. A cup of tea costs $2 and one biscuit costs $0.2, and she spends $33.60 on tea and biscuits every week. Use a diagram measuring the number of biscuits on the horizontal axis to show her compensated variation and equivalent variation if the price of a biscuit decreases to $0.1. What can you say about the change in her consumer surplus?.arrow_forwardCan consumer surplus be zero? If yes then in what scenario does this happen?arrow_forwardSuppose a consumer has a budget of $200 to spend on two goods, X and Y, whose prices are $20 and $10, respectively. If the consumer is observed to buy 5 units of X and 10 units of Y, where the respective Marginal Utilities of X and Y are, 50 and 40 utils, is the consumer in equilibrium? Explain why or why not. If the consumer is not in equilibrium under conditions in d), suggest another combination that would possibly achieve equilibrium. Explain your answer.arrow_forward
- What is consumer surplusarrow_forwardRefer to the graph shown. When the price is P1, total consumer surplus is A. A B. A+B C. A+B+C D. A+B+C+D E. A+B+C+D+Earrow_forwardExplain why it is that as the consumer purchases more of a good, her marginal utility falls while her total utility rises.arrow_forward
- A consumer has inverse demand of p=15−1q for a good and the market price is $4.00. Calculate consumer surplus and the total value of the good for the corresponding quantity consumed. Consumer surplus is $enter your response here. (Enter your response rounded to two decimal places.) The consumer's expenditure for the good is $enter your response here. (Enter your response rounded to two decimal places.)arrow_forwardq18- Which of the following statements about the budget constraint is true? The slope of the budget constraint is: (i) the rate at which a consumer can trade one good for another (ii) equal to the slope of the highest indifference curve (iii) constant Select one: a. (i) and (ii) b. (i) and (iii) c. (ii) and (iii) d. (i) only Clear my choicearrow_forwardexplain the consumer equilibrium condition according to the utility theory.arrow_forward
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