Indifference curves, Econometrics

Assume that the allowance Peter receives from parents is his only income.  He used to spend $30 a month to buy Coke at $.60 per can.  Coke is an inferior good for Peter.  Further assume that on October 1 price of Coke dropped to $.50 a can, while prices of other goods did not change. If Peter continued buying the same quantities of Coke and other goods, this would have obviously saved him $5.00. Assume, however, that parents reduced Peter's October allowance by $5.00.   

Please choose and explain your answers to the following questions and illustrate them by a detailed graph or graphs where the quantities of Coke are displayed on the horizontal axis, while the quantities of the composite of "other goods" are on the vertical axis. In your graph(s) please clearly mark Peter's choices in September, October and November as points Es , Eo , En . Please also clearly mark the corresponding budget lines and indifference curves.  

(i) Will Peter, in fact, buy more or less Coke in October than in September? 

a. more

b. less

c. this cannot be determined without additional information.

Posted Date: 4/1/2013 3:45:23 AM | Location : United States







Related Discussions:- Indifference curves, Assignment Help, Ask Question on Indifference curves, Get Answer, Expert's Help, Indifference curves Discussions

Write discussion on Indifference curves
Your posts are moderated
Related Questions
In the United States, a buyer of a new electric is eligible for a one-time federal income tax credit of up to $4,000. Show the effect of this tax credit graphically, assuming the $

what is ac that mines average cost,

PrivateJets (PJ) is considering expanding its operations in the corporate travel market. Currently, PJ has a capital structure with a 25% debt-equity ratio. Their levered equity

You have collected data for 104 countries to address the difficult questions of the determinants for differences in the standard of living among the countries of the world. You rec

You are a property insurer and one of your potential clients, whose current wealth is $450,000, wants to insure her $250,000 house.  The chances of the house burning down in any gi

Peter's utility function is u(x, y) = x + 2y where  x  is the number of ounces of coffee and  y  is the quantity of sugar in grams.  Let unit prices be given by  P x = 6 cents,  P

The following multiple regression results are part of a study of the demand for chicken in the USA. Q Calculates the quantity of chicken purchased per annum. PC and PB are the pric

energy consumption and economic growth

what are the test for heteroscedasticity?

1. What are the two roles that prices play in a competitive economy? How are these two roles related to the Fundamental Theorems of Welfare Economics? 2. The Undercover Economis