MICROECONOMICS (LL)(FD)
21st Edition
ISBN: 9781260191806
Author: McConnell
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 7, Problem 3RQ
To determine
Cause of downward slope of demand curve.
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A consumerās budget set for two goods (X and Y) is 600 ā„ 3X + 6Y. (LO2)
a. Illustrate the budget set in a diagram.
b. Does the budget set change if the prices of both goods double and the consumerās
income also doubles? Explain.
c. Given the equation for the budget set, can you determine the prices of the two
goods? The consumerās income? Explain.
Refer to figure 6.1. Assume that L1 represents the budget line before a price change. Point C represents the:
A) uncompensated effect on an increase in the price of soup
B) compensated effect on a decrease in the price of soup
C) uncompensated effect on a decrease in the price of soup
D) compensated effect on an increase in the price of soup
Title
Assume Brian"s income elasticity of demand for milk is 1, and he spends 1% of his income on milk. If his price elasticity of demand for milk is ā0.03, what is his substitution price elasticity?
Ā
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Assume Brian"s income elasticity of demand for milk is 1, and he spends 1% of his income on milk. If his price elasticity of demand for milk is ā0.03, what is his substitution price elasticity?
Chapter 7 Solutions
MICROECONOMICS (LL)(FD)
Ch. 7.1 - Prob. 1QQCh. 7.1 - Prob. 2QQCh. 7.1 - Prob. 3QQCh. 7.1 - Prob. 4QQCh. 7.A - Prob. 1ADQCh. 7.A - Prob. 2ADQCh. 7.A - Prob. 3ADQCh. 7.A - Prob. 1ARQCh. 7.A - Prob. 2ARQCh. 7.A - Prob. 1AP
Ch. 7.A - Prob. 2APCh. 7.A - Prob. 3APCh. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7P
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- Suppose the own price elasticity of demand for goodĀ XĀ is ā4, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and goodĀ YĀ is 4. Determine how much the consumption of this good will change if:Instructions:Ā Enter your responses as percentages. If you are entering a negative number, be sure to use a (ā) sign.a. The price of goodĀ XĀ decreases by 4 percent.Ā percentb. The price of goodĀ YĀ increases by 9 percent.Ā percentc. Advertising decreases by 2 percent.Ā percentd. Income increases by 3 percent. Ā percentarrow_forwardQ2 The demand for good X is given by Qx d = 6,000āāā1/2 Px āāā Py ā+ā9 Pz ā+ā 1/10 M Research shows that the prices of related goods are given by Py = $6,500 and Pz = $100, while the average income of individuals consuming this product is M = $80,000. and Px = $5,230? Find own price elasticity, cross price, and income elasticity. Indicate whether goods Y and Z are substitutes or complements for good X. Good x is an inferior or normal good?arrow_forward- Create a consumer model that shows how economists explain the consumer choice between two products (X & Y) that maximize the consumerās utility. Do not use numbers. Just graphs and detailed explanations.Ā Show why the equilibrium point (tangency) shows the best bundle of X & Y and that any other point will not reflect a bundle that maximizes consumers' utility. Explain the income and substitution effect.Ā Derive the demand function from the consumer theory. Do not use numbers. Just graphs and detailed explanationsarrow_forward
- 4. Assume that the price changed from P1 to P2. Compute for the point elasticity and determine the degree of elasticity: P1 = 25 P2 = 32 Ā Q1 = 5 Q2 = 5.1 Ā What is the Elasticity coefficient and Degree of Elasticity? Ā Note: coefficient should be rounded off to two decimal places; Degree of Elasticity should be any of the following: Elastic, Inelastic, Unit Elastic, Perfectly Elastic, or Perfectly Inelastic.arrow_forwardWhich of the following statements are true? Instruction: you may choose more than one option. O. The Law of Demand is explained by the Slutsky-Hicks equationO. All statements are false.O. For well behaved preferences the income effect is positive.O. For well behaved preferences the substitution effect is non positive.O. if the demand foro good increases when income Ā then the demand for that good must decrease when its price increases.O. A Giffen good cannot be explained by the Slutsky-Hicks equation.arrow_forwardQ.3. Ā Ā Ā Suppose that Salim income is OMR 3000. His demand for good X and good Y depends upon the prices for these two goods, if the price of one unit of (good X) is OR Ā 50 and the price of one unit of (good Y) is OR 60. If Ali income increase to 4200 will this affect Salim satisfaction level. Discuss a) Draw the budget line for Salim b) Find the slope of this budget line.arrow_forward
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