Reference no: EM13861994
1. Jim sees commuting by bus and T as perfect substitutes (U = T + B), that is, he would exchange one commute by bus for one commute by T. The price of a bus ticket is $1.50 and the price of a T ticket is $2.00. Jim has $6.00 to spend on commuting. (a) Graph the budget constraint. (b) Find the best affordable bundle and add it to the graph with the relevant indifference curve.
2. Kim has $200 per week to spend on gas and food. The price of gas is $4/gallon and the price of food is $2/unit. (a) Sketch Kim’s budget constraint with gas on the y-axis. (b) What is the opportunity cost of an additional unit of food in terms of gallons of gas? (c) Suppose that gas prices spike to $5/gallon but the price of food remains constant. Sketch the new budget constraint with gas on the y-axis. (d) Now what is the opportunity cost of an additional unit of food in terms of gallons of gas? (e) Explain the relationship between the slope of the budget constraint and the opportunity cost of food in terms of gas.
3. Sometimes stores have sales that limit the quantity you can purchase at the sale price. If you buy more than the limit, you pay the full price. Assume that your local grocery store is having a sale on yogurt where the first 4 are on sale for $1.00 per container, after which they cost $2.00. 1 (a) Graph your budget constraint if you have $20 to spend on yogurt. Label your x and y axis clearly and accurately to receive credit. (b) Add a budget constraint to the graph that represents a decrease in income.
4. Shannon loves fashion and her hats and scarf must always match. However, Shannon loses her hats all the time so she buys two hats for each scarf she buys. In other words, she views scarves and hats as complements in a 1:2 ratio U = min{2S, H}. Shannon has $120 to spend on hats and scarves. Hats are $10 and scarves are $20. (a) Graph Shannon’s indifference curves for scarves and hats. (b) Find Shannon’s best affordable bundle assuming U = min{2S, H}.
5. Use the table below to answer the following questions. The table contains the marginal rates of substitution at different quantities of two goods (X and Y) for different levels of utility – this is a table of the indifference curves in the graph below. The table uses the utility function U = (XY ) 1 2 which yields indifference curves of the form Y = U2 X . U=2 U=3 U=4 U=6 X Y MRS X Y MRS X Y MRS X Y MRS 1 4 4 1 9 9 1 16 16 1 36 36 2 2 1 2 4.5 2.25 2 8 4 2 18 9 3 1.33 0.44 3 3 1 3 5.33 1.78 3 12 4 4 1 0.25 4 2.25 0.56 4 4 1 4 9 2.25 5 0.8 0.16 5 1.8 0.36 5 3.2 0.64 5 7.2 1.44 6 0.67 0.11 6 1.5 0.25 6 2.67 0.44 6 6 1 7 0.57 0.08 7 1.29 0.18 7 2.29 0.33 7 5.14 0.73 8 0.5 0.06 8 1.13 0.14 8 2 0.25 8 4.5 0.56 (a) Write and graph the equation for the budget constraint if M=48 and Px=8 and Py=8. (b) What is the utility maximizing bundle of x and y given this budget constraint? What is the consumer’s level of utility. Add a representative indifference curve for convex preferences that includes this bundle to your graph.
The income elasticity of demand for servants
: Studiesindicate that the income elasticity of demand for servants in the United Statesexceeds 1. However, the number of servants has been decreasing during the last75 years, while incomes have risen significantly. How can these facts bereconciled?
|
Does private ownership entitle the owners to do anything
: What would happen to the size of the cattle population if Americans decided to eat substantially less beef? Explain the logic underlying your answer. Does private ownership entitle the owners to do anything they want with their property? Why or why n..
|
How people interact in markets
: Principles of Economics, and the specific discussion areas include the economic principles that guide how people make economic decisions (choices), how people interact in markets, and how the economy as a whole works.
|
Determine the sign of the income and cross-price elasticity
: Suppose the demand function for some good X is given by QDx = 1000 - 5Px + 3Py + 12M, where QDx is the quantity of x demanded, Px is its price, Py is the price of good Y, and M is average consumer income. This good is normal and goods X and Y are sub..
|
Budget constraint-opportunity cost of food in terms of gas
: Jim sees commuting by bus and T as perfect substitutes (U = T + B), that is, he would exchange one commute by bus for one commute by T. The price of a bus ticket is $1.50 and the price of a T ticket is $2.00. Explain the relationship between the slo..
|
Draw graph to show consumer surplus in the separated markets
: Create a column that computes point elasticity for each price - Draw a graph to show consumer surplus in the separated markets?
|
Area and are considering becoming a physician f
: You are a new physician setting up your own practice in a new town. You are researching the different MCOs offered in your area and are considering becoming a physician for one of these networks. You have also invited the sales representatives of sev..
|
Effective interview preparation techniques include
: Effective interview preparation techniques include practicing answers to possible questions
|
The firm produce in order to maximize profit?
: Suppose in the short run a perfectly competitive firm has variable cost = 6q2, and MC = 12q where q is the quantity of output produced. Also, the firm has fixed cost F = 6144. a) If the market price of the product is $336, how much output should th..
|