Question

Use the following information to answer questions 298 30. Assume a consumer purchases 5 pizzas and 4 sodas. The price of pizza is $6 and the price of soda is $2. The consumer spends all of their income on pizza and soda. 29. What is the consumer's budget (income) for this problem? a $62b. $26 c. $12 d. $38 30. If the consumer decides to purchase 4 units of pizzas, how much soda will the consumer purchase? A5 B.6 C. 7 D. 8 The relative price 31. In the above example, the relative cost of soda in terms of pizza is also represents the of soda in terms in terms of pizza. a. 3 sodas, absolute price b. 2 pizzas, equilibrium price c. 1/3 pizza, opportunity cost d. % sodas, market cost 32. In the single commodity market model, the area below equilibrium price and above the supply curve represents A. producer surplus B. consumer surplus C. total surplus D. all of the above 33. The role of an economic system is to a. Create a fair economy for all members of society. b. Maximize the profits of entrepreneurs in society. c. Ensure that free market stays competitive. d. Allocate society's scarce resources.

Answer 1

29. Option D is correct. To calculate the total income, multiply the number of quantity with its price.

Therefore, $6 * 5 + $2 * 4 = $30 + $8 = $38.

30. Option C is correct. 4 units of pizzas means, the consumer spend $24 ($6*4). Subtract this spending from his total income(i.e.$38). Now he left with $14 of his income. The price of each soda is $2. Divide $14 by $2, and we will get the no. of sodas he will purchase with his remaining income i.e. 7.

31. Option C is correct. A relative price is the price of a commodity such as a good or service in terms of other goods. Therefore the cost of soda in terms of pizza is $2/$6 = 1/3. If a consumer will sacrifice his one-third quantity of pizza he will get one soda. And his this sacrifice is said to be the opportunity cost.

32. Option A is correct. And the area above the equilibrium level and below the demand curve is said to be consumer surplus.

33. Option D is correct. Mainly, there are four roles which economic system play; Production, Allocation, Distribution and Regeneration.