Assume a consumer consumes only strawberries and tacos. Price of strawberries, PS is $2 and price...
- Assume a consumer consumes only strawberries and tacos. Price
of strawberries, PS is $2 and price of tacos,
PT is $3, and income of the consumer is $120.
- Write down this consumers Budget constraint. Draw the BC and mark the x and y coordinates. What is the slope of this BC?
- If the income increases to $180, show graphically how the BC changes. Mark the x and y coordinates. Write down the new BC. What is the slope of the BC?
- If instead the price of strawberries increases to $3, show graphically how the BC changes. Mark the x and y coordinates. Write down the new BC. What is the slope of the BC?
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Assume a consumer consumes only strawberries and tacos. Price
of strawberries, PS is $2 and price...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x , price of Y is P Y and the consumer income is m. a. Derive and interpret the budget constraint and its slope. b. If slope is -3, how will you interpret it? c. Suppose a government wants to discourage the excessive consumption of X and decides to impose a tax t 1 if someone consume more than X 1 but less than X...
Imagine a representative consumer, whose utility for apples (X) and all other goods (Y) can be...
Imagine a representative consumer, whose utility for apples (X) and all other goods (Y) can be represented in a Cobb-Douglas form. 1. Please graphically represent consumer indifference curves, given prices Px and Py and the budget constraint M. 2. What will happen to consumer utility and optimal bundle if consumer income (budget) increases and apples are a necessity good? Please show graphically and explain the intuition. 3. What will happen to consumer utility and optimal bundle if apple price decreases...
5. A consumer has income of $3,000. Wine costs $3 per glass, and cheese costs ...
5. A consumer has income of $3,000. Wine costs $3 per glass, and cheese costs $6 per pound. a. (0.5 pt) Draw the consumer’s budget constraint with wine on the vertical axis. (Make sure to label the axes.) b. (0.1 pt) What is the slope of the budget constraint? c. (0.1 pt) On the graph for part a, draw an indifference curve illustrating an optimum bundle (point K). d. (0.4...
General Equilibrium: Consider an economy that can produce tacos (X) and hamburgers (Y). Let the production possibilities...
General Equilibrium: Consider an economy that can produce tacos (X) and hamburgers (Y). Let the production possibilities frontier (PPF) be Y2 = 100-4X2 (Eq. 1) or, equivalently ? = √100 − 4?2 (Eq. 2) (for positive values of tacos and hamburgers). This means that the rate of product transformation (RPT), the number of hamburgers that must be given up to get one more taco along the PPF, is − ??/?? = 4?/(√100−4?2) a. Suppose initially that the price of X...
Charlotte consumes only flies, f, and gnats, g. As she has long lost the ability to...
Charlotte consumes only flies, f, and gnats, g. As she has long lost the ability to spin web, she relies on the local market, Zuckerman’s general store. The price of flies is pf , and the price of gnats is pg. Charlotte’s income is Y . (a) Write and graph Charlotte’s budget constraint, denoting all key intercepts and slopes. (b) The price of gnats at Zuckerman’s general store increases to p'g . Write and graph Charlotte’s budget constraint, denoting all...
Sally consumes two goods, X and Y. Her utility function is given by the expression U...
Sally consumes two goods, X and Y. Her utility function is given by the expression U = 2 · XY ^2 . The current market price for X is $10, while the market price for Y is $12. Sally’s current income is $900. a. Sketch a set of two indifference curves for Sally in her consumption of X and Y. b. Write the expression for Sally’s budget constraint. Graph the budget constraint and determine its slope. c. Determine the X,Y...
3) Sally consumes two goods, X and Y. Her utility function is given by the expression...
3) Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3 · XY2. The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. a. Sketch a set of two indifference curves for Sally in her consumption of X and Y. b. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. c. Determine the X, Y...
The following graph shows three indifference curves and budget constraints for a consumer. The consumer is...
The following graph shows three indifference curves and budget constraints for a consumer. The consumer is initially consuming at point A, on the indifference curve Ui and is constrained by the budget constraint BC1 (indicated by the blue line) Bc3 10 Ul BC BC 10 Suppose the government provides this consumer a subsidy on good x, which effectively lowers the price of x. This is represented by a of BC1 out away from the origin. The result is this consumer...
Imagine a representative consumer, whose utility for apples (X) and all other goods (Y) can be...
Imagine a representative consumer, whose utility for apples (X) and all other goods (Y) can be represented in a Cobb-Douglas form. 1) Please graphically represent consumer indifference curves, given prices Px and Py and the budget constraint M. 2) What will happen to consumer utility and optimal bundle if consumer income (budget) increases and apples are a necessity good? Please show graphically and explain the intuition. 3) How would the Engel curve look like for point #2?
Consider a consumer that lives only for two periods. He works in period 1 (and gets...
Consider a consumer that lives only for two periods. He works in period 1 (and gets income Y1) and retires in period 2 (and gets income Y2 < Y1). This consumer has the usual preferences over time: u(C1) + βu(C2) Assume that now the consumer is allowed to save or borrow. Write down the new budget constraint. What is the consumption in period 1 and period 2? Display graphically. Could the consumer be worse of? Could the consumer be better...
3) Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3 · XY2. The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. a. Sketch a set of two indifference curves for Sally in her consumption of X and Y. b. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. c. Determine the X, Y...
The following graph shows three indifference curves and budget constraints for a consumer. The consumer is initially consuming at point A, on the indifference curve Ui and is constrained by the budget constraint BC1 (indicated by the blue line) Bc3 10 Ul BC BC 10 Suppose the government provides this consumer a subsidy on good x, which effectively lowers the price of x. This is represented by a of BC1 out away from the origin. The result is this consumer...
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