Suppose Natasha consumes two goods: good 1 and good 2. Last year, the price of good 1 was $2.00 and the price of good 2 was $5.00. Given these prices, Natasha maximized satisfaction consuming bundle A, as indicated in the figure to the right. However, this year, the price of good 1 has increased to $6.00 and the price of good 2 has changed to $9.60. Given these prices, Natasha would be equally well off at consumption bundle B. 100- 90 80- Calculate a Laspeyres cost-of-living index for Natasha using 100 as the base for last year. In particular, the Laspeyres index for this year is (Enter your response rounded to two decimal places.) 70 60- 8 50- 40 30- 20- 10- 10 20 30 60 70 80 90 100 Good 1 Good 2

Suppose Natasha consumes two goods: good 1 and good 2. Last year, the price of good 1 was $2.00 and the price of good 2 was $5.00. Given these prices, Natasha maximized satisfaction consuming bundle A, as indicated in the figure to the right. However, this year, the price of good 1 has increased to $6.00 and the price of good 2 has changed to $9.60. Given these prices, Natasha would be equally well off at consumption bundle B. 100- 90 80- Calculate a Laspeyres cost-of-living index for Natasha using 100 as the base for last year. In particular, the Laspeyres index for this year is (Enter your response rounded to two decimal places.) 70 60- 8 50- 40 30- 20- 10- 10 20 30 60 70 80 90 100 Good 1 Good 2

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 6QFR

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Suppose Natasha consumes two goods: good 1 and good 2. Last year, the price of good 1 was $2.00 and the price of good 2 was $5.00. Given these prices, Natasha maximized satisfaction consuming bundle A, as indicated in the figure to the right. However, this year, the price of good 1 has increased to $6.00 and the price of good 2 has changed to $3.75. Given these prices, Natasha would be equally well off at consumption bundle B. Calculate a Laspeyres cost-of-living index for Natasha, using 100 as the base for last year. In particular, the Laspeyres index for this year is. (Enter your response rounded to two decimal places.) The Laspeyres index suggests inflation has been percent over the year. (Enter your response rounded to two decimal places.) The Laspeyres cost-of-living index overstates the rate of inflation because it assumes that consumers do not alter their consumption patterns as prices change. Natasha's true cost-of-living increase has been percent. (Enter your response rounded…
Suppose Naomi consumes two goods: good 1 and good 2. Last year, the price of good 1 was $2.00 and the price of good 2 was $3.20. Given these prices, Naomi maximized satisfaction consuming bundle A, as indicated in the figure to the right. However, this year, the price of good 1 has increased to $6.00 and the price of good 2 has changed to $2.40. Given these prices, Naomi would be equally well off at consumption bundle B. Calculate a Laspeyres cost-of-living index for Naomi using 100 as the base for last year. In particular, the Laspeyres index for this year is. (Enter your response rounded to two decimal places.) The Laspeyres index suggests inflation has been percent over the year. (Enter your response rounded to two decimal places.) The Laspeyres cost-of-living index overstates the rate of inflation because it assumes that consumers do not alter their consumption patterns as prices change. Naomi's true cost-of-living increase has been percent. (Enter your response rounded to two…
Caroline has a $10 dessert budget that she uses to buy pie and cake. Assume the price of pie (Pp) is fixed at $2. Table A shows Caroline's marginal MU utility (MU) and marginal utility per dollar () she receives from the first through fifth slices of pie she buys each week. Table B shows the same information for cake when the price of a slice of cake (Pc) is either $4 or $2. Assume that Caroline is rational consumer who wants to maximize her utility. Table A MU/P (If P=2) Pie MU (Slices) (Utils) 30 15 1 24 12 20 10 14 7 Table B Cake MU MU/P (Slices) (Utils) (If P=$4) (If P=$2) 40 10 20 32 8 16 2 24 12 16 4 8 4 1 2. 96 4. 4 5 1.
70- 60- B 50- 40- 30- Suppose Naomi consumes two goods: good 1 and good 2. Last year, the price of good 1 was $2.00 and the price of good 2 was $3.20. Given these prices, Naomi maximized satisfaction consuming bundle A, as indicated in the figure to the right. However, this year, the price of good 1 has increased to $6.00 and the price of good 2 has changed to $2.40. Given these prices, Naomi would be equally well off at consumption bundle B. Calculate a Laspeyres cost-of-living index for Naomi using 100 as the base for last year. In particular, the Laspeyres index for this year is ☐. (Enter your response rounded to two decimal places.) The Laspeyres index suggests inflation has been percent over the year. (Enter your response rounded to two decimal places.) The Laspeyres cost-of-living index overstates the rate of inflation because it assumes that consumers do not alter their consumption patterns as prices change. Naomi's true cost-of-living increase has been ☐ percent. (Enter your…
Rohan’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is 200 utils per ounce. If peanuts cost $0.10 per ounce and cashews cost $0.50 per ounce, is Rohan maximizing his total utility from the kinds of nuts? Instructions: Enter your responses as whole numbers. At the current level of peanut consumption, Rohan receives: utils per dollar.At the current level of cashew consumption, Rohan receives: utils per dollar.Therefore, Rohan maximizing his total utility because MUp/Pp is MUc/Pc.
You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the following table. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X.
Consider the figures to the right. Suppose that the individual currently consumes 5 digital apps. What happens to the person's total utility if they reduce their consumption to 4 units? Why does this fact imply that the marginal utility curve cuts through the horizontal axis of the lower figure between the fourth and fifth app consumed? Reducing consumption to 4 apps from 5 apps leaves total utility at utils in the upper , which is the figure. Hence, the marginal utility between these two quantities of apps equals value of the axis in the lower figure. Thus, the marginal utility curve crosses the axis of the lower figure between units 4 and 5. (Enter your responses as whole numbers.) Marginal Utility (utils per week) 6- 4- 22 Total Utility (utils + q r per week) 14- 12- 10- 20 ø Ø 18- 04 0 Downloaded Digital Apps Utilized per Week Downloaded Digital Apps Utilized per Week G Q
Rohan’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is 200 utils per ounce. If peanuts cost $0.10 per ounce and cashews cost $0.50 per ounce, is Rohan maximizing his total utility from the kinds of nuts? Enter your responses as whole numbers. At the current level of peanut consumption, Rohan receives: utils per dollar.At the current level of cashew consumption, Rohan receives: utils per dollar.Therefore, Rohan maximizing his total utility because MUp/Pp is MUc/Pc.
The marginal utility of good A is 4 utils, and its price is $ 2. The marginal utility of good B is 6 utils, and its price is $1. Is the individual consumer maximizing (total) utility if she spends a total of $3 by buying one unit of each good? If not, how can more utility be obtained? Explain using the Equimarginal principle.
Imagine, we are in ancient Greece. Praxilla lives in Athens and derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem, 27 units of marginal utility from her second poem, 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her first three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumbers consumed. A poem costs three bronze coins, but a cucumber only costs one bronze coin. Praxilla has 18 bronze coins. 1. Sketch Praxilla’s budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18…
Raymond consumes meatloaves and pineapples. He has decided that hismonthly budget will be $1500. Suppose that one meatloaf costs $375, while one pineapple costs $150. Suppose Raymond decides to cut his monthly budget in half. Coincidentally, the next time he shops, he learns that meatloaves and pineapples are on sale for half price. Show what happens to Raymond’s budget line?
Kai’s current marginal utility from consuming orange juice is 50 utils per ounce and her marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.25 per ounce and coffee costs $0.20 per ounce, is Kai maximizing her total utility from the two beverages? Instructions: Enter your responses as whole numbers. At her current level of consumption, Kai receives: utils per dollar spent on orange juice.At her current level of consumption, Kai receives: utils per dollar spent on coffee.Therefore, Kai maximizing her total utility because MUoj/Poj is MUc/Pc. Kai’s current marginal utility from consuming orange juice is 50 utils per ounce and her marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.25 per ounce and coffee costs $0.20 per ounce, is Kai maximizing her total utility from the two beverages? Enter your responses as whole numbers. At her current level of consumption, Kai receives: utils per dollar…