Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 6.A, Problem 8SQ
To determine
The budget line of the consumer.
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Given 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 image
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.
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?
Chapter 6 Solutions
Micro 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
- Explain how the budget constraint might change if income and prices of all goods increased in same proportion?arrow_forwardIf a household has an income of $50 and buys only milk at $3 each unit and honey at $6 each unit, what is the household’s budget equation? Explain your answer.arrow_forwardGraph the budget line showing all the different combinations of good ? (drawn on the horizontal axis) and good ? (drawn on the vertical axis) that can be bought given the consumer’s total income. In the graph, indicate the y-intercept and x-intercept of the budget line.arrow_forward
- If the price of good X increases, what will happen to the budget line? It will shift outward It will become steeper It will become flatter It will shift inwardarrow_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 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_forwardSuppose a consumer has a budget for fast-food items of $60 per week and spends this money on two goods, hamburgers and pizzas. Suppose hamburgers cost $10 each and pizzas cost $20. Put the quantity of hamburgers purchased per month on the horizontal axis and the quantity of pizzas purchased per month on the vertical axis. Draw the budget line. What is its slope?arrow_forward
- What happens to the budget line if the price of good 2 increases, but the price of good 1 and income remain constant?arrow_forwardDraw 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_forwardOriginally 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.arrow_forward
- Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8 respectively. How much is the consumer’s income?arrow_forwardThe income of a consumer is $40, the price of A is $5, and the price of B is $2. If the quantity of A is measured vertically, then the slope of the budget line is?arrow_forwardLinda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T) = 2ST, so MUs = 2T and MUT = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing. A. What is the equation for her budget line? Draw it (with T on the vertical axis) and label the slope and intercepts. B. What is Linda's marginal rate of substitution? Explain. C. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget line.arrow_forward
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