Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 1, Problem 5Q
To determine
The representation of the budget constraint and explanation of trade-offs faced by consumers.
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Chapter 1 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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Similar questions
- Who introduced utilityarrow_forwardThink back to a purchase that you made recently and respond to the following: How would you describe your thinking before you made that purchase? Did you have any budget constraints? If so, what were they? Would you have made the purchase if the price had increased? Why or why not?arrow_forwardExplain what the utility maximizing choice means. Discuss how you could use marginal utility to make consumer choicesarrow_forward
- What is meant by the term “utility,” and how does it relate to purposeful behavior?arrow_forwardUsing a budget line, why does a decrease in the price of a good allow one to potentially consume more of both goods?arrow_forwardHow can time be incorporated into the theory of consumer behavior? Explain the following comment: “Want to make millions of dollars? Devise a product that saves Americans lots of time.”arrow_forward
- At the start of the week, Marie decides to buy a pie. Does this imply that the utility she receives from this pie is greater than or less than her opportunity cost of purchasing the pie? Marie is thinking about purchasing a second pie. Do we expect the marginal utility she receives from the second pie to be greater than, less than, or equal to the marginal utility she receives from the first pie? Explain your answer.arrow_forwardWhat other factors affect the marginal utility?arrow_forwardWhat can observing people’s actual choices tell us about their preferences? Whatis this approach called?arrow_forward
- The law of diminishing marginal utility is consistent with the fact that people trade. Do you agree or disagree? Explain your answer.arrow_forwardSuppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $.75 and the price of peanuts is $1.50.a. Construct a table showing the alternative combinations of the two products that are available.b. Plot the data in your table as a budget line in a graph. What is the slope of the budget line? What is the opportunity cost of one more candy bar? Of one more bag of peanuts?Do these opportunity costs rise, fall, or remain constant as each additional unit of the product is purchased?c. How, in general, would you decide which of the available combinations of candy bars and bags of peanuts to buy?d. Suppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Why would this budget line be preferable to the old one?arrow_forwardUsing the consumer choice theory, explain how an individual decides what combination of different products to buy?arrow_forward
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