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Suppose Mike’s utility consists of consuming two ordinary goods: Hotdogs (normal good) and beer (inferior good). Quantity and price for hotdogs and beer are Xh, Xb, Ph and Pb and his income is I. Drawing a clean and clear graph, answer the following questions. Show the answer to all the parts on one graph. Note: Put beer on the horizontal axes and hotdogs on the vertical axes.
a. Draw Mike’s indifference curve, budget line and show the optimal point on the graph.
b. Suppose government decreases excise tax on beer. Draw the new budget line and show the new optimal point. (Hint: pay attention to the type of the two goods.)
c. Show the income effect, substitution effect and total effect.
d. Refer to your graph, are these two goods substitutes, complements or unrelated?
Many conspiracy theories have been offered as explanations for the assassinations of the great leaders of the 1960s and still fascinate society today. Share some of those conspiracy theories. What contributes to the belief in conspiracy theories?
Fantastic Footwear can invest in one of two different automated clicker cutters, A and B. The first cutter, A, has a $ 100 000 first cost. Another similar cutter with many extra features, B, has a $ 400 000 first cost. Cutter A will save $ 50 000 per..
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The government three functions that directly affect the level of GNP. a) it purchases goods tax revenues; c) it makes transfer payments. Explain how each of transactions are treated in the National Income Accounts.
Draw a demand-supply graph and label the aces with the price and quantity of khaki pants for each scenario below. Does this event increase or decrease demand and/or supply? Find the new equilibrium and compare it with the original one in terms of equ..
Give an example of an event or incident that has taken place in the U.S. economy which has a major economic impact--be specific, e.g., 9/11 attack, natural disaster, rise or fall in oil prices due to OPEC policies, consumer optimism or pessimism abou..
"Which expression is another way of saying "marginal cost"? "
Argentina pegged its currency in 1991. Explain why a peg is useful for reducing inflation. Explain
According to Banerjee and Duflo, are poor people caught in a poverty trap, so that their pursuit of the things they need for immediate subsistence prevent them from saving up for better health care and education? Explain their position and the eviden..
At the end of its third year of operations, the Sandifer manufacturing Co. had $4,513,000 in revenues, $3,333,000 in cost of goods sold, $446,000 in operating expenses which included depreciation expense of $152,000, and a tax liability equal to 34 p..
Suppose an investment broker contacts you with the following information. “Opportunity, Inc. is currently selling for $5 a share. I just found out that the company has discovered a cure for cancer. Its price is sure to triple in three months.” How sh..
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