of 3 ZOOM 3. Draw a graph with an indifference curve and a budget line for two goods, movies (measured on the vertical axis) and concerts (measured in the horizontal axis) to illustrate a case where the consumer is buying a non-optimal combination on MUConcerte Pconcerts her budget line for which MUMovies PMovies
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- I like drinking Smirnoff and Stoli Vodka, but I really only careabout the total amount of alcohol I get out of it. They areperfect substitutes. Smirnoff is sold in liter bottles that are100 proof (that’s 50% alcohol). Stoli is sold in liter bottlesthat are 80 proof (40% alcohol). What is my utility functionfor bundles of these two vodkas? What do my indifferencecurves look like?Currently, Paula is maximizing utility by purchasing five TV dinners (T) and four LeanCuisine Meals (L) each week. Suppose both T and L cost $5 each.a. Graph Paula’s initial utility-maximizing choice.b. Suppose the price of T falls by $1 and the price of L rises by $1.25. Can Paula stillafford to buy her initial consumption choices? What do you know about her new budgetconstraint?c. Make a new graph to show why Paula will choose to consume more T and less Lgiven her new budget constraint to maximize utility. Is her utility increased, decreased,or unchanged given the price change? [Hint: try to make the graph as big as possible tosee how the utility is tangent/intersects with the lines more easily] d. In part (b), suppose another scenario where the price of T rises by $1 and the priceof L falls by $1.25. Is Paula’s utility increased, decreased, or unchanged given the pricechange?Kim has $40 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $10 while each yoga class costs $5. a. Graph Kim’s budget constraint, with movies on the x-axis and yoga on the y-axis. What is the value of the x-intercept? What is the value of the y-intercept? What is the slope of this budget constraint? Suppose the total utility from each of these activities is listed in the table below. What is Kim's utility maximizing point? Movies Total Utility Yoga Classes Total Utility 0 0 0 0 1 40 1 30 2 70 2 55 3 90 3 75 4 95 4 90 5 100 5 100 6 105 6 105 movies and yoga classes How much total utility does she obtain from this combination? c. Suppose the price of movies drops to $5 each. What is her new optimal consumption choice? The new slope of her budget constraint is? Kim will choose to consume how many movies and how many yoga…
- 1) The local breakfast restaurant has a new offer: those who buy more than 10 sandwiches a month get a 50% discount on additional sandwiches. a b. Jack says he is not interested. In a different graph that includes his budget line before and after (again measure EOG on the Y axis and sandwich consumption on the X axis) and his preferences, show his sandwich consumption before and after. In your graph what indicates that he is NOT better off with this deal? ExplainPage of 3 > Due November 1, 2 Press Esc to exit full screen A. Jack enjoys a cup of cappuccino every morning, which is made with equal parts of steamed milk (m) and espresso(e). Suppose Jack's utility function U(m, e) = min(m, e). Graph Jack's indifference curves when U = 4 and U = 8. B. Leslie buys 2 goods: z and y. His utility function is U(z,y) = 5x+3y. 1. Plot this consumer's indifference curves when U = 15 and U = 20. What is the shape of Leslie's indifference curves? 3. For Leslie, how are these two goods related? C. Leslie's friend Tim has a different utility function for the same goods U(x, y) = √zy. 1. Plot this consumer's indifference curves when U = 15 and Ū = 20. 2. What is the shape of Tim's indifference curves? D. A consumer's utility function for goods 2 and y is U(z,y) = x+2y. 2. 1. Calculate the consumer's marginal utility for each good at (2,2) (Hint: marginal utility represents the amount of utility the consumer gains by consuming one more unit of this good. You can…39. The following chart shows thec total utility-that Ammar receives from çonşuming various amounts-of chocolate.candy bars each day: Number candy, bars consumed për đay Total'utility 1' 40- 2 70 90 100 4. 80 Which of the following statements about Ammar's marginal utility is correct? Hiş marginal utility from the first candy bar is greater-than his marginalutility from the second candy' bar
- 6. Indifference curves and utility maximization Giberto plays the violin as part of a string trio and advertises booking opportunities using brochures he distributes in bars around the oity. Making one graysale brochure costs$0.02, but adding color increases the cost to$0.08per brochure. Gilberto sets aside a monthly budget of$14,00for creating brochures. The following graph shows three of Gaberto's indifference curves for the number of grayscale and color brochures that he makes. Use the green line (triangle symbol) to plot Giberto's budget constraint. Then, place the black point (alus symbol) on the graph to indicate Giberto's optimal consumption choice given that budget constraint. optimal consumption choice given that budget constraint.A consumer’s preferences between goods x and y are representedby the utility function u(x, y) = 2min{x, y}+10. Suppose this consumer hasincome of $16, the price of good x is $3 and the price of good y is $1. Suppose the price of good x increases to $7 while the price of good y andthe consumer’s income stay constant. Calculate the magnitudes of the compensating and the equivalent variations. Explain what each measures.26. Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys A) the combination that gives him equal total utility from pies and soda B) 2 pies and 2 cans of soda C) oniy sodas because they are iess expensive D) the combination that gives him the same marginai utility per doillar spent on pies as on soda
- Total Total Utility Utility 6 10 10 14 13 15 15 15 16 7 30. If the consumer has only $8 to spend, what would be the optimal consumption of both goods for this consumer? Githe O HD C Number of Colas 1 2 3 4 D 5 a. 4 colas and 2 burgers. b. 5 colas and 1 burger. c. 2 colas and 3 burgers. d. 4 colas and 4 burgers. MUC 6 4 3 2 1 MU/S 6 4 3 2 1 Number of Burgers 1 2 3 4 5 MUb wwwww 10 4 1 0 -8 MU/$ 5 2 0.5 0 -4Sarah spends her monthly entertainment budgeton books and movies. Sarah’s initial utility-maximizing combination of books and movies is fivemovies and two books a month. Assume the priceof books falls. Sarah’s new utility-maximizingcombination of books and movies is five moviesand four books. Given this information, can wesay whether movies are a normal good?You consume only soda and pizza. One day, the priceof soda goes up, the price of pizza goes down, andyou are just as happy as you were before the pricechanges.a. Illustrate this situation on a graph.b. How does your consumption of the two goodschange? How does your response depend onincome and substitution effects?c. Can you afford the bundle of soda and pizza youconsumed before the price changes?