(2) Graph the following given these two goods and their respective prices: books (units with per week) at price Pb=1; and food (units per week) at price Pf=2: (a) Point A (market basket A) that maximizes satisfaction of a consumer. (b) Point B (market basket B) that is affordable but satisfaction is not maximized. (c) Point C (market basket C) that gives a higher level of satisfaction but not affordable.

(2) Graph the following given these two goods and their respective prices: books (units with per week) at price Pb=1; and food (units per week) at price Pf=2: (a) Point A (market basket A) that maximizes satisfaction of a consumer. (b) Point B (market basket B) that is affordable but satisfaction is not maximized. (c) Point C (market basket C) that gives a higher level of satisfaction but not affordable.

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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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.
You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the table below. 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 (price–quantity-demanded table) for X.
Suppose you go to Trader Joe's to buy fruit for the week. You only like apples (A) and bananas (B) and your weekly fruit budget is $11. When you arrive at Trader Joe's you notice that the price of an apple is $1.00 and the price of a banana is $0.25. QUESTION #1: How many apples and bananas should you buy? QUESTION #2: When you have found the answer, draw a diagram that shows the outcome. Step #1. Determine your preferences. Let's suppose that your preferences can be represented by the following utility function: U(A, B) = AªBB = A0.40 B0.60 FYI: This utility function is known as a Cobb-Douglas utility function. It is the most commonly used function used in economics! The reason we like it so much is that it has: 1. Constant returns (double your consumption of A and B and your utility doubles); a + B = 1 2. Diminishing marginal utility (the extra utility gained from consuming A (or B) decreases as you consume more of the A good (or B good); a 0.40); B > a. Step #2: Determine your…
Suppose you go to Trader Joe's to buy fruit for the week. You only like apples (A) and bananas (B) and your weekly fruit budget is $11. When you arrive at Trader Joe's you notice that the price of an apple is $1.00 and the price of a banana is $0.25. QUESTION #1: How many apples and bananas should you buy? QUESTION #2: When you have found the answer, draw a diagram that shows the outcome. Step #1. Determine your preferences. Let's suppose that your preferences can be represented by the following utility function: U(A, B) = AªBß = A0.40 B0.60 FYI: This utility function is known as a Cobb-Douglas utility function. It is the most commonly used function used in economics! The reason we like it so much is that it has: 1. Constant returns (double your consumption of A and B and your utility doubles); a + B = 1 2. Diminishing marginal utility (the extra utility gained from consuming A (or B) decreases as you consume more of the A good (or B good); a 0.40); B > a. Step #2: Determine your…
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