Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 5, Problem 11P
To determine
Explain the statement with the help A’s income consumption curve.
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Megan likes to eat toast with hazelnut spread and drink wine. She enjoys these items in very specific proportions: For every piece of toast with
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Two possible bundles of toast with hazelnut spread and glasses of wine are shown on the following graph, labeled A and B.
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Justin Barlow, a careful maximizer of utility, consumes only two goods, Krispy
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A consumer has Cobb-Douglas preferences for beer and pizza. She spends 50% of her budget on New Belgium Fat Tire ale, 20% on Coors Light, and 30% on pizza. Her budget is $500. The price of New Belgium is $9, the price of Coors is $6, and the price of pizza is $12. Suppose Coors acquires New Belgium, and now charges $7.50 for both types of beer. In order to quantify by how much this consumer is better off or worse off because of the merger:
Solve for their demand functions for each good, as functions of generic prices and budget. Note that the budget shares tell you what the exponents are in the Cobb-Douglas utility function.
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Chapter 5 Solutions
Microeconomics
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6P
Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 1CPCh. 5 - Prob. 2CPCh. 5 - Prob. 3CPCh. 5 - Prob. 4CPCh. 5 - Prob. 5CPCh. 5 - Prob. 6CPCh. 5 - Prob. 7CPCh. 5 - Prob. 8CP
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- At Annie's current level of consumption, let MUp denote Annie's marginal utility from an additional pound of pasta, and let MUb denote Annie's marginal utility from an additional loaf of bread. Thus, MUp/MUb represents the number of loaves of bread Annie has to give up in order to buy another pound of pasta. the number of loaves of bread Annie is willing to give up to have another pound of pasta. the number of pounds of pasta Annie has to give up in order to buy another loaf of bread. the number of pounds of pasta Annie is willing to give up to have another loaf of bread.arrow_forwardBecky needs to decide how many cups of coffee and pieces of cake she will buy for a meeting with an office mate. She estimates her total utility for different quantities of coffee and cakes below. A cup of coffee is $1.00, and each piece of cake is $0.50. Becky has a total of $3 to spend. What is Becky's total utility if she buys 1 cup of coffee and 4 pieces of cake? Cups of Coffee 1 2 3 4 5 6 Utility from Consumption Pieces of Cake 1 2 3 4 5 6 A B C D Total Utility from Cups of Coffee 33 56 79 Total Utility from Pieces of Cake 15 32 48 63 77 90 Total Utility of Different Consumption Bundles Consumption Bundle Cups of Coffee Pieces of Cake Total Utility 3 0 2 2 1 4 0 6arrow_forwardMegan enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs Pp = $2. Suppose that Megan buys 30 pounds of cheese and 20 pounds of fruit per week. The following graphs show her marginal utility curves for cheese and fruit. At her current consumption level, Megan's marginal utility from consuming the last pound of cheese she bought is MUC = 12 utils per pound, and her marginal utility from consuming the last pound of fruit she bought is MUR = 12 utils per pound. MU OF CHEESE (Utils per pound) 24 20 16 12 m 0 10 40 20 30 CHEESE (Pounds per week) Is Megan currently maximizing her utility? 50 60 ? MU OF FRUIT (Utils per pound) 24 20 16 12 8 4 0 0 10 40 20 30 FRUIT (Pounds per week) 50 Yes; the marginal utility she receives from her last pound of cheese equals that of her last pound of fruit. No; she likes fruit and cheese more than other goods, so she should buy more of both. No; she could buy less fruit and more cheese, not spend any more…arrow_forward
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