2 (a) Explain how a consumer allocates expenditure according to the principle of equi-marginal utility and analyse how a change in income might affect that allocation. (b) Discuss how a government might achieve a more equal distribution of income.

2 (a) Explain how a consumer allocates expenditure according to the principle of equi-marginal utility and analyse how a change in income might affect that allocation. (b) Discuss how a government might achieve a more equal distribution of income.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 2SCQ: Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to...

See similar textbooks

Similar questions

1. Explain with the help of a neat labelled diagram, what happens to equilibrium price and quantity in the following situations: a. A big increase in demand is followed by a smaller increase in supply. b. A decrease in demand is followed by an equal decrease in supply. 2. When the price of "X" changes from OMR 10 to OMR 15, the demand for "Y changes from 15525 kgs to 18725 kgs. Calculate cross elasticity of demand for these goods. What kind of products are “X" and "Y"? marks) (2 3. Assume that in the short run a firm is producing 200 units of output, has average total costs of OMR350, and average variable costs of OMR200. Calculate Fixed costs. Define fixed costs. (2 marks)
1. Sarah is planning a birthday party and has $I to spend on balloons and party favors. The price of each party favor is $3. Her budget line for balloons and party favors is shown in the figure below. The MRT "of party favors for balloons" is 4. What is her budget, I? a. b. C. d. e. $600 $240 $200 $150 $100 Balloons 200 Party Favors
11. The income-consumption curve is used to derive an individual’s demand curve.(a) True(b) False
1. Identify some reasons why household income differ. Which factor is the most important? 2. Consumer choice theory assumes that consumer are rational but we observe a person behaving differently in apprantly similar situations. Is it realistic to think that we account for rational behaviour in every situation?
This question concerns a person in an economy in which they only consumetwo commodities, coffee and cake. This person always consumes thesecommodities together in a fixed ratio; whenever they drink a cup of coffee, theyeat a single cake.This person has a budget of £99 to spend on coffee and cake. a. Price of coffee is £2 and the price of a cake is £1. ii. Price of coffee is £8 and the price of a cake is £1 iii. Price of coffee is £10 and the price of a cake is £1. b. Using the information from part a, draw an individual demand curve for coffee for this person. Briefly explain how you used the information frompart a to create the demand curve. c. Assume the price of coffee is £2 and the price of a cake is £1. This personnow decides to limit their consumption of coffee to one cup of coffee a dayand one cake a day. Discuss how this decision to limit their consumptioncontradicts the axioms of behaviour for consumption
Value as Marginal Benefit of Successive Items of Five Alternative Goods Produced and Consumed Every successive item in each category is produced at constant, identical unit-cost Quantity Lasagna Vaccinations. Math Courses: Energy Drinks 1 $10 9 2 3 4 5 6 8 7 6 5 I $9 8 Cost-Benefit for Right Goods 6 5 4 $8 7 Arthur would gain by forfeiting one unit of in order to fund one more unit of 6 5 4 3 $7 6 5 4 3 2 Trips to Brussels $6 5 4 3 2 1 8. The marginal benefit magnitudes above constitute the value or maximum-willing-to-pay for each successive unit of each kind of good. It reflects the valuations of representative citizen, Arthur. Arthur currently procures and enjoys one lasagna, one math course, three energy drinks, and two trips to Brussels, as underlined and bolded. lle
1. Second Fundamental Theorem of Welfare Economicsa. Describe the theorem, making sure that you define clearly the terms used in thedescription (e.g. if you use the term “efficient” you have to describe what this means).b. Explain why the theorem implies that there is no intrinsic trade-off between efficiencyand interpersonal equity. c. Demonstrate your argument using an Edgeworth box, making sure that you describe allthe elements of the box appropriately.
Units of the Good 0 1 5678AWN2 3 4 Total Utility Total Utility of X of Y 0 0 620 1740 1120 3030 1500 3960 1820 4710 2080 5280 2300 5730 2460 6060 2580 6300 For the next 3 questions, assume that an individual consumes two goods X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $20 and $30. If the consumer buys the fourth unit of X the Marginal Utility per Dollar Spent on X is 16 I If the consumer has $210 to spend on X and Y, the utility-maximizing bundle is The minimum budget necessary to move to a higher equilibrium consumption of X and Y is $ unit(s) of X and unit(s) of Y.
21. The budget constraint:(a) Represents the set of all baskets the consumer can afford(b) Represents the set of all baskets the consumer can afford while spending all availableincome(c) Represents the set of all baskets that give the consumer the same level of utility whileholding spending constant(d) Represents the set of all baskets in which the consumer purchases only one of the goods
Q-4 Suppose that Kaleed’s income 1800 RO. And he purchased 30 units of goods y that cost 30 RO per unit. Calculate how many units Kaleed can buy of product X when it costs 20 RO.
Number of Units of Commodity 5 6 7 D. 116 8 25. Refer to the above table. What is the marginal utility of the fourth unit? A. 36 B. 44 C. 80 Total Utility 36 80 150 252 350 440 26. Refer to the above table. The addition of which unit has the greatest marginal utility? A. Fifth B. Sixth C. Seventh D. Eighth 27. Refer to the above table. At what consumption level for this product does diminishing marginal utility set im A. 4 units 8.5 units C. 6 units D. 7 units
12. What are the mathematical steps in deriving demand and indirect utility?