Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 6.A, Problem 13SQ
To determine
The slope of the budget line.
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Originally the consumer faces the budget line p1x1 + p2x2 = m. Then the price of good 1 doubles, the price of good 2 becomes 8 times larger, and income becomes 4 times larger. Write down an equation for the new budget line in terms of the original prices and income.
If all prices and income increase by 10%, then the budget line will:
a.
rotate around its axis.
b.
remain unchanged.
c.
be vertically parallel.
d.
move inward.
e.
move outward.
Suppose initially that the price of X is $5, the price of Y is $10, and the consumer's income is $100. If Y is measured on the vertical axis, X is measured on the horizontal axis, and the price of Y increases to $20:
a. the entire budget line will shift inward toward the origin, with its slope changing from –1/2 to –1/4.
b. the budget line will pivot inward toward the origin along the X axis, with its slope changing from –1/2 to –1/4.
c. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from –1/2 to –1/4.
d. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from –1/4 to –1/2.
Chapter 6 Solutions
Economics For Today
Ch. 6.1 - Prob. 1YTECh. 6.1 - Prob. 2YTECh. 6.2 - Prob. 1YTECh. 6.A - Prob. 1SQPCh. 6.A - Prob. 2SQPCh. 6.A - Prob. 3SQPCh. 6.A - Prob. 1SQCh. 6.A - Prob. 2SQCh. 6.A - Prob. 3SQCh. 6.A - Prob. 4SQ
Ch. 6.A - Prob. 5SQCh. 6.A - Prob. 6SQCh. 6.A - Prob. 7SQCh. 6.A - Prob. 8SQCh. 6.A - Prob. 9SQCh. 6.A - Prob. 10SQCh. 6.A - Prob. 11SQCh. 6.A - Prob. 12SQCh. 6.A - Prob. 13SQCh. 6.A - Prob. 14SQCh. 6.A - Prob. 15SQCh. 6 - Prob. 1SQPCh. 6 - Prob. 2SQPCh. 6 - Prob. 3SQPCh. 6 - Prob. 4SQPCh. 6 - Prob. 5SQPCh. 6 - Prob. 6SQPCh. 6 - Prob. 7SQPCh. 6 - Prob. 8SQPCh. 6 - Prob. 9SQPCh. 6 - Prob. 10SQPCh. 6 - Prob. 1SQCh. 6 - Prob. 2SQCh. 6 - Prob. 3SQCh. 6 - Prob. 4SQCh. 6 - Prob. 5SQCh. 6 - Prob. 6SQCh. 6 - Prob. 7SQCh. 6 - Prob. 8SQCh. 6 - Prob. 9SQCh. 6 - Prob. 10SQCh. 6 - Prob. 11SQCh. 6 - Prob. 12SQCh. 6 - Prob. 13SQCh. 6 - Prob. 14SQCh. 6 - Prob. 15SQCh. 6 - Prob. 16SQCh. 6 - Prob. 17SQCh. 6 - Prob. 18SQCh. 6 - Prob. 19SQCh. 6 - Prob. 20SQCh. 6 - Prob. 21SQCh. 6 - Prob. 22SQCh. 6 - Prob. 23SQCh. 6 - Prob. 24SQCh. 6 - Prob. 25SQ
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Similar questions
- Originally the consumer faces the budget line p1x1 + p2x2 = m.What happens to the budget line if the price of good 2 increases, but the price of good 1 and income remain constant?arrow_forwardGiven the following budget line pxx+pyy=m And that the slope of the budget line depends only on relative prices, show what happens to the budget line when: (a) px rises (b) m reduces (c) Both px and py rise by the same proportion (d) a consumer is given an in-kind transfer of 40 units of good y (e) the government imposes a quantity tax (t) on good y please take note of the imagearrow_forwardA consumer has initial income of $100 and faces prices of Px = $1 and Py = $5. Graph the budget line, and show how it changes when the price of good X increases to P1x = $5 .arrow_forward
- The movement of the budget line from AB to CD is consistent : a decrease in the consumer’s money income. a decrease in the prices of both Goods 1 and 2. an increase in the prices of both Goods 1 and 2. a decrease in the price of Good 1, and an increase in the price of Good 2.arrow_forwardWhat happens to the original budget line if the price of good ? doubled? (i.e., Will there be a change in the slope and/or intercepts of the original budget line? If yes, what are those changes?). Interpret economically how the change in the price of good ? affects the consumption decision of the consumerarrow_forwardSuppose the price of a donut is $2.50, the price of a cinnamon roll is $3.20, and the budget is $50. Donuts are on the x-axis and cinnamon rolls are on the y-axis. If the budget is decreased to $40, what happens to the Budget Line? The budget line undergoes a parallel shift outward The budget lines undergoes a parallel shift inward The budget lines rotates outward The budget lines rotates inwardarrow_forward
- Draw two axes: on the horizontal axis (x-axis), represent the quantity of good x, and on the vertical axis (y-axis), represent the quantity of good y. Plot the initial budget line. The equation for the budget line is m = px * x + py * y. You can rearrange it to solve for y: y = (m - px * x) / py. With given values for m, px, and py, you can plot the line that represents all combinations of goods x and y that the consumer can afford. Plot the indifference curves. These curves represent the combinations of goods x and y that give the consumer the same level of utility. Due to the complexity of the given utility function U(x, y) = xy / (x + y), it may be challenging to plot the exact indifference curves. As an alternative, you can use a simpler utility function for demonstration purposes, such as U(x, y) = x^a * y^b (where a and b are positive constants), which results in easier-to-plot curves. Locate the initial optimal consumption bundle, which is the point where the budget line is…arrow_forwardAssume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. What is the slope of the budget line if the quantity of apples were measured on the horizontal axis and bananas on the vertical axis? −0.5 −0.8 −1.6 −2arrow_forwardIt is given that the price of goods X and Y are both Rs.10 each, a consumer consumes 10 units of X and 10 units of Y at equilibrium.a. Draw the budget line and indifference curve and show the point of consumer equilibrium. b. If the price of X falls to Rs.5, PY and money income remaining the same, what is the real income increase?c. At the new equilibrium caused by a fall in price of X, the consumer has a combination of 16 units of X and 12 units of Y. Show the price effect of a change in price of X using the PCC.d. Why are more units of Y consumed even though its price has not fallen?arrow_forward
- Suppose the price of a donut is $2.50, the price of a cinnamon roll is $3.20, and the budget is $50. Donuts are on the x-axis and cinnamon rolls are on the y-axis. If the price of a donut increases to $3.30, what happens to the Budget Line? The budget line undergoes a parallel shift outward The budget lines undergoes a parallel shift inward The budget lines rotates outward The budget lines rotates inwardarrow_forwardThe income of a consumer is $40, the price of A is $2, and the price of B is $6. If the quantity of A is measured vertically, then the slope of the budget line is Multiple Choice −3.0. −0.5. −0.33. −2.5.arrow_forwardDraw and label the following budget curves on a clearly labeled graph. A consumer uses their full income to purchase goods x and y. 1. The income is 24 and the initial price of x is 2 and the price of y is 3. 2. The same as 1 but the income has risen to 36. 3. The same as 1 but the price of y is 6. 4. Apply both of the changes from 2 and 3. Income rise to 36 and the price of y rises to 6.arrow_forward
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