Question

1.) For this exercise you will need to first build a graph to these specifications: Draw...

1.) For this exercise you will need to first build a graph to these specifications: Draw a budget constraint with vertical intercept (0,8) and horizontal intercept (4,0). Zach’s indifference curves are downward sloping straight lines with a slope of -1 i.e. they all have vertical intercept (0,N) and horizontal intercept (N,0) for some number N. Draw Zach’s indifference curves. Label the bundle(s) that Zach will consume when optimizing.

2.) Now suppose the price of the “x-good” falls to become 4 times smaller than it was originally. Draw Zach’s new budget constraint. Draw in Zach’s indifference curves and label the new optimal bundle(s). Interpret Zach’s indifference curves: are the good substitutes or complements to Zach?

3.) Emily likes pretzels and Pepsi. She bought 12 bottles of Pepsi for $3 each. Her marginal utility for the twelfth bottle was 9 utils. She also bought 5 bags of pretzels for $4 per bag. Her marginal utility for the fifth bag was 8 utils. Assume Emily exhausted her budget on this purchase of Pepsi and pretzels, but wanted to maximize her utility. Would she have been better off buying more Pepsi and fewer pretzels, more pretzels and less Pepsi, or was her purchase already optimal? Assuming her marginal utilities are constant across all levels of consumption. Are pretzels and Pepsi complements or substitutes to Emily?

Homework Answers

Answer #1

1)

2)

3)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In order to submit this assignment, you will use this webform to upload a document file...
In order to submit this assignment, you will use this webform to upload a document file (.doc) or (.docx) with your answers. You may use a drawing program or sketch by hand. Be sure that your responses model clear economic reasoning and addresses each of the following: 1.) For this exercise you will need to first build a graph to these specifications: Draw a budget constraint with vertical intercept (0,8) and horizontal intercept (4,0). Zach’s indifference curves are downward sloping...
For this exercise you will need to first build a graph to these specifications: Draw a...
For this exercise you will need to first build a graph to these specifications: Draw a downward sloping demand curve with vertical intercept (0,150) and horizontal intercept (25,0). Draw a supply curve with vertical intercept (0,50) and with slope=4 i.e. the market equilibrium occurs at (10, 90). a. Compute consumer, producer, and total surplus at the market equilibrium. b. Label consumer surplus and producer surplus if the government imposes a price floor of $120, then compute deadweight loss. c. Compute...
7. Suppose you have the following utility function for two goods: u(x1, x2) = x 1/3...
7. Suppose you have the following utility function for two goods: u(x1, x2) = x 1/3 1 x 2/3 2 . Suppose your initial income is I, and prices are p1 and p2. (a) Suppose I = 400, p1 = 2.5, and p2 = 5. Solve for the optimal bundle. Graph the budget constraint with x1 on the horizontal axis, and the indifference curve for that bundle. Label all relevant points (b) Suppose I = 600, p1 = 2.5, and...
Suzie, a former actress, spends all her income doing the two things she loves: attending plays...
Suzie, a former actress, spends all her income doing the two things she loves: attending plays and going to movies. Plays and movies are perfect substitutes for Suzie and she likes plays exactly twice as much as she likes movies. a. (Use one color) Carefully draw her indifference map (at least two indifference curves) with plays on the vertical axis and movies on the horizontal axis). Label them such that U2>U1. You can use increments of 2 on the axes....
1. A consumer has the utility function U = min(2X, 5Y ). The budget constraint isPXX+PYY...
1. A consumer has the utility function U = min(2X, 5Y ). The budget constraint isPXX+PYY =I. (a) Given the consumer’s utility function, how does the consumer view these two goods? In other words, are they perfect substitutes, perfect complements, or are somewhat substitutable? (2 points) (b) Solve for the consumer’s demand functions, X∗ and Y ∗. (5 points) (c) Assume PX = 3, PY = 2, and I = 200. What is the consumer’s optimal bundle? (2 points) 2....
jane has $36 per week to spend on burgers (B) and milkshakes (M). The price of...
jane has $36 per week to spend on burgers (B) and milkshakes (M). The price of a burger is $4 and milkshakes are $3 .a.Write the equation for Jane’s budget constraint .b.Graph Jane’s budget constraint with burgers on the horizontal axis. Be sure to label both the x-intercept and the y-intercept with the proper value. c.If Jane spends all of her money on these two goods, how many milkshakes can she buy if she buys three burgers this week? d.Draw...
Jane has $36 per week to spend on burgers (B) and milkshakes (M). The price of...
Jane has $36 per week to spend on burgers (B) and milkshakes (M). The price of a burger is $4 and milkshakes are $3. a. Write the equation for Jane’s budget constraint. b.Graph Jane’s budget constraint with burgers on the horizontal axis. Be sure to label both the x-intercept and the y-intercept with the proper value. c.If Jane spends all of her money on these two goods, how many milkshakes can she buy if she buys three burgers this week?...
1. A new ________ that is parallel to the first one, but just tangent to the...
1. A new ________ that is parallel to the first one, but just tangent to the new indifference curve, will reveal the real-income effect. maximization point perfect substitute curve perfect complement curve budget constraint line indifference curve 2. Marginal utility occurs when total utility declines as consumption increases. is the additional satisfaction derived from consuming one more unit of a good or service. is the combination of goods and services that maximizes utility for a given income. occurs when a...
Charlie likes buying shoes and going out to sing. His utility function for pairs of shoes,...
Charlie likes buying shoes and going out to sing. His utility function for pairs of shoes, S, and the number of times he goes singing per month, T, is U(S,T)=2S^2T^2 . It costs Charlie $50 to buy a new pair of shoes or to spend an evening out singing. Assume that he has $500 to spend on shoes and singing. a. What is the equation for her budget line? Draw the budget constraint with the T on the vertical axis,...
3. Nora enjoys fish (F) and chips(C). Her utility function is U(C, F) = 2CF. Her...
3. Nora enjoys fish (F) and chips(C). Her utility function is U(C, F) = 2CF. Her income is B per month. The price of fish is PF and the price of chips is PC. Place fish on the horizontal axis and chips on the vertical axis in the diagrams involving indifference curves and budget lines. (a) What is the equation for Nora’s budget line? (b) The marginal utility of fish is MUF = 2C and the Marginal utility of chips...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT