Chapter 6, Problem 6.2P

Suppose there are three (3) people in a market for bottles of perfume; Mutumbu, Jasanu and Julius The individual demand for perfumes for each of these consumers is given as 10 bottles for Mutumbu, 15 bottles for Jasanu and 25 bottles for Julius at $60 per bottle for perfume. Thus, the market demand for perfumes if the market price is $60 is. (a)40 bottles (b)60 bottles (c)80 bottles (d) None of theb above

State whether each of the following statements is trueor false. Explain your answers.a. “All Giffen goods are inferior goods.”b. “All inferior goods are Giffen goods.”

Using separate diagrams illustrate the income and substitution effects of a price increase for an inferior good, explaining the two possisble outcomes.

3 part question, please answer completely: Jaime has preferences over GOOD (A) and GOOD (B), with $60 to spend on the two goods. The market price of GOOD A is currently $3. However, if she purchases a membership to Costco for $10, she can purchase GOOD B for $2. However, Costco does not sell GOOD B and can only be bought at a price of $1. 1. Write down the mathematical expression describing Jaime budget constraint for two separate cases. In the first, she does not buy the Costco membership, but in the second she does. Very carefully, graph both budget constraints on the same diagram with GOOD B on the horizontal axis and GOOD A on the vertical axis, again labeling all slopes and intercepts. A clear illustration will help you with the following subquestions. Assume for now that Jaime's preferences satisfy the standard consumer theory assumptions: they are monotonic, she has a diminishing marginal rate of substitution, etc so can you say for certain if Jaime will choose to buy the…

True or False. State with reasoning: The theory of second best says that if there is a distortion that cannot be removed from the market, then it is never best to get all other variables to the Pareto efficient allocation.

Anya is awake for 100 hours per week. Using onediagram, show Anya’s budget constraints if sheearns $12 per hour, $16 per hour, and $20 per hour.Now draw indifference curves such that Anya’slabor-supply curve is upward-sloping whenthe wage is between $12 and $16 per hour andbackward-sloping when the wage is between $16and $20 per hour

Candance’s general budget constraint for the two goods is a follow: B= PxX + PyY Also, her marginal utilities are: MUx =30X^2Y^3 and MUy =30X^3Y^2 A. Derive the Hicksian demand for good X at these prices. Hint, you need to choosethe three correct equations you’ve derived above and solve simultaneously. Also,draw both demand curves on the same graph.B. Using the information derived in parts A and B, what is the substitution effect andincome effect obtained when changing the price of good X from a value of 1 to avalue of 2.

Economists say that a market where goods are not consumed by those valuing the goods most highly is O laissez-faire.. unequal. O inefficient. O rational.

(a)  Draw a figure showing the separation of the substitution effect from the income effect (as defined by Hick) for a price increase.    (b)  Draw another figure showing the derivation of two demand curves for a price increase, one that keeps money income constant and the other that keeps real income constant as defined by Hicks     (c)  Which of the two demand curves you derived in part (b) is more price elastic for the price increase? Why? Would your answer change if the good were inferior?      (d)  Draw another figure showing why the demand curve that keeps money income is not really a demand curve at all.