Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 7.A, Problem 1ADQ
Subpart (a):
To determine
The information embodied in a budget line.
Subpart (b):
To determine
The information embodied in a budget line.
Subpart (c):
To determine
The information embodied in a budget line.
Subpart (d):
To determine
The information embodied in a budget line.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Q1 please help me quickly!! Your budget is $200. The price of good 1 (x1) is $4 per unit, and that of good 2 (x2) is $3 per unit. Then, the equation for your budget line can be written as
O 5x1 + 3x2 = 200
◎ 4x1 + 3x2 = 200
◎ 4x1+ 4x2 = 200
O 5x1 + 3×2 = 195
22. Peanut butter (PB) sells for 10 dollars per pound and Oysters (O) sell for 50 dollars perpound. Suppose Pat buys 5 pounds of peanut butter and one pound of oysters each month.With this consumption bundle, his MRSP B,O = 3. Which of the following is true (assumingPat’s preferences satisfy all the basic assumptions of consumer theory)?(a) Pat could increase his utility by buying more oysters and less peanut butter.(b) Pat could increase his utility by buying more peanut butter and less oysters.(c) Pat could increase his utility by buying more peanut butter and more oysters.(d) Pat could increase his utility by buying less peanut butter and less oysters.
Petra has $480 to spend on DVDs and books. Abook costs $24 and a DVD costs $15. [LO 7.2]a. Write an equation for the budget constraint.Let x 5 books. Let y 5 DVDs.b. Use your equation to determine how manybooks Petra can buy if she buys 8 DVDs.
Chapter 7 Solutions
Economics (Irwin Economics)
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
Knowledge Booster
Similar questions
- 4 Assume that a person's utility over two goods is given by U(g1; g2) = g1 + ln g2. The price of good g1 is equal to p1 and the price of good g2 is p2. The total income of the individual is given by I. The marginal rate of substitution between g1 and g2 is given by 1/(1/g2). Then, the expressions for this person's (1) budget constraint, (2) budget line's slope (assume that, graphically, g1 is on the horizontal axis and g2 on the vertical axis), and (3) the person's demand function for g2 (that is, g2 as a function of price ratio) are respectively:arrow_forwardA consumer has $300 to spend on goods X and Y. The market prices of these two goodsare Px = $15 and Py = $5. (LO2)a. What is the market rate of substitution between goods X and Y?arrow_forwardAntonio buys five new college textbooks during his first year at school at a cost of $80 each. Used books cost only $50 each. When the bookstore announces that there will be a 50 percent increase in the price of new books and a 50 percent increase in the price of used books, Antonio's father offers him $200 extra. What happens to Antonio's budget line? 1.) Using the line drawing tool, graph Antonio's original budget line. Label this line L1. 2.) Using the line drawing tool, then graph Antonio's new budget line. Label this line L2. Carefully follow the instructions above, and only draw the required objects.arrow_forward
- 3. Suppose that Omar’s marginal utility for cups of coffee is constant at 1.5 utils per cup, no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee? *use tables and/or graphs if possible, please original workarrow_forwardA consumer’s budget set for two goods (X and Y) is 600 ≥ 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 consumer’s income also doubles? Explain. c. Given the equation for the budget set, can you determine the prices of the two goods? The consumer’s income? Explain.arrow_forwardKatie’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 80) x (L – 40) This utility function implies that Katie’s marginal utility of leisure is C – 80 and her marginal utility of consumption is L – 40. There are 110 hours in the week available to split between work and leisure. Katie earns $15 per hour after taxes. She also receives $200 worth of assistance benefits each week regardless of how much she works. Graph Katie’s budget line. What is Katie’s marginal rate of substitution when L = 70 and she is on her budget line? What is Katie’s reservation wage? Find Katie’s optimal amount of consumption and leisure.arrow_forward
- True or false with reasoning: 1) _______When we claim that utility can be ordinally measured, we assume that the consumer is able to measure the total and marginal utility received when one extra unit of a commodity is consumed. 2)_______If MRS between two goods is constant, then having more of one good without having more of the other does not increase utility. 3)_______Marginal Utility increases until total utility is at a maximum and then marginal utility decreases.arrow_forwardSuppose that Omar’s marginal utility for cups of coffee is constant at 1.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee?arrow_forward1. How does a consumer’s optimal choice of goods change if all prices and the consumer’s income double? (Hint: focus on the budget constraint) 2. Output is produced according to a production process given by: Q = 4LK, where L is the quantity of labor input and K is the quantity of capital input. If the price of K is $10 and the price of L is $5, then what is the cost-minimizing combination of K and L capable of producing 32 units of output?arrow_forward
- Table 8P-4 lists the prices and quantities consumed of three different goods from 2014-2016. [LO 8.2] a. For 20142015, and 2016, determine the amount 4, 20 that a typical consumer pays each year to pur chase the quantities listed in the table. b. Using the amounts you found in part a, calculate the percentage change in the amount the con sumer paid from 2014 14 to 2015 , and from 2015 to 2016. c. Why is it problematic to use your answers to part b as a measure of inflation ? d. Suppose we take 2014 as the base year, which implies that the market basket is fixed at the 2014 consumption levels. Using 2014 consump tion levels, now find the rate of inflation from 2014 to 2015 and from 2015 to 2016. (Hint : First calculate the cost of the 2014 market basket using each year's prices and then find the per centage change in the cost of the basket. ) e. Repeat the exercise from part d, now assuming that the base year is 2015. f. Why were your answers from parts d and e different?arrow_forward. Suppose that initially, bread is $2 per loaf,and cake is $2 per slice. Marie Antoinettehas $18 to spend on these items each week.At this income and those prices, Marie consumes 5 loaves of bread and 4 slices of cake.Then, the price of bread DECREASES to$1 per loaf. (The price of cake is still $2.)IF Marie’s budget had also fallen to $13so that she could still just afford her original bundle, she WOULD choose to spendthose $13 on 7 loaves of bread and 3 slicesof cake.But since Marie still has her original $18budget, she actually chooses to buy 4loaves of bread and 7 slices of cake afterthe price change.When the price of bread fell from $2 to $1,what was the substitution effect on Marie’sdemand for bread?arrow_forwardGeorge enjoys bananas and leisure. He sleeps 8 hours per day. Of the remaining 16 hours, for each hour he works he is paid 2 bananas. He also receives 6 bananas in dividends but has to pay 6 bananas in taxes. Draw George’s budget constraint (put consumption on the vertical axis and leisure on the horizontal). Make sure to show the vertical and horizontal intercepts as well as the slope. Now suppose that George chooses to work 6 hours per day. Find how many hours o f leisure and how many bananas he will consume, and show his optimal choice on the budget line using an indifference curve. Suppose that the government uses some of the taxes to give back to George income assistance of 4 bananas. Show the impact of the measure on George’s budget constraint Use an indifference curve to show George’s new optimal allocation and explain what will happen to his consumption of bananas and leisure if both are normal goods. The graphs below shows the behaviour of consumption of durables and…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning