ZuoTi.Pro
Question

Emma consumes only two goods: Good A and Good B

Emma consumes only two goods: Good A and Good B. Emma has a monthly salary of $1,000 from her part-time job. The price of Good A is $10. The price of Good B is $2. Emma currently consumes 5 units of Good A and consumes 25 units of Good B in a month.

(a) Draw Emma's budget constraint and optimal consumption bundle. Please put Good A on the x-axis and Good B on the y-axis.  

(b) Emma has just received a 5% pay increase. The price of Good A and the price of Good B have increased by 5% as well due to inflation. Draw Emma's new budget constraint and optimal consumption bundle. Please put Good A on the x-axis. How many units of Good A does she consume? How many units of Good B does she consume?


business   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 9 more requests to produce the answer.

1 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Emma consumes only two goods: Good A and Good B
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Suppose Peggy consumes only two goods, gasoline and cigarettes. Her income is $120, the price of...

    Suppose Peggy consumes only two goods, gasoline and cigarettes. Her income is $120, the price of cigarettes per pack is $4 and the price of gasoline per gallon is $2. Currently, she consumes 40 gallons of gas at optimal level. a) Sketch the following budget lines. Be sure to show how you calculated the slopes and end points. (Put gas on the X axis.). b) What is optimal level consumption of cigarettes for Peggy? Use an arbitrary convex indifference curve,...

  • Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r...

    Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r, y)- .5,2 where denotes the quantity of good X and y denotes the quantity of good Y. The current market price for X is px 10 while the market price for Y is Pr = $5. Sally's current income is $500. (a) Write the expression for Sally's budget constraint. (1 point) (b) Find the optimal consumption bundle that Sally will...

  • - Mordecai consumes only coffee (C) and video games (G), and his utility function is U(C,G)=C1/2G1/2....

    - Mordecai consumes only coffee (C) and video games (G), and his utility function is U(C,G)=C1/2G1/2. The price of coffee is p, and the price of video games is 10. Mordecai’s income is m. In this problem, you will find Mordecai’s utility maximizing combination of coffee and video games. a.Suppose m=100 and p=10. How much of each good does Mordecai consume? Draw a graph showing his budget constraint and indifference curve passing through the chosen bundle. (2 points) 
 b.Suppose m=100...

  • Good Y Good X The diagram above shows a budget constraint on Good X and Good...

    Good Y Good X The diagram above shows a budget constraint on Good X and Good Y. Point A is the original optimal bundle. Suppose Good X is an inferior good and the price of Good Y increases, draw the new budget constraint. Would the income effect increase or decrease the consumption on Good Y? Would the substitution effect increase or decrease the consumption on Good Y? If the substitution effect is larger than the income effect, indicate the new...

  • Refer to the graph below for the questions 2a-2f). Wolfie consumes pizza and soda and the...

    Refer to the graph below for the questions 2a-2f). Wolfie consumes pizza and soda and the graph illustrates his indifference curves. 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 Pizza 2. a) Suppose Wolfie has an income of $24, that Ppizza = $2, and that Psoda = $2. Draw Wolfies budget constraint in the above figure. What is the opportunity cost of one more slice of pizza? b) At this...

  • Doreen has a utility function U(x, y) = 10x + 5y. The price of good x...

    Doreen has a utility function U(x, y) = 10x + 5y. The price of good x is $1, and the price of good y is $2. If Doreen's income is $100, how many units of good y would she consume if she chose the bundle that maximizes her utility subject to her budget constraint?

  • Question 1: Louis the retired Canadian lives on a fixed budget and consumes only two goods:...

    Question 1: Louis the retired Canadian lives on a fixed budget and consumes only two goods: toques (T) and maple syrup (M). Suppose Louis monthly budget is 100 and the price of the two goods are (PT,PM) (4,2). (a) Make a properly labeled diagram illustrating Louis'budget constraint with T on the hori- zontal axis and M on the vertical axis. Indicate the area corresponding to the set of bundles (M, T) that Louis can afford. (b) What is the maximum...

  • Cat only buys tomatoes (x) and cucumbers (y) and her preferences can be identified with U(x,x)=6x2y....

    Cat only buys tomatoes (x) and cucumbers (y) and her preferences can be identified with U(x,x)=6x2y. a. What is Cat's marginal utility for tomatoes, and what is her marginal utility for cucumbers? How does Cat's utility change when she consumes more tomatoes? How does her utility change when she consumes more cucumbers? b. Find Cat’s marginal rate of substitution (tomatoes are on the x axis and cucumbers on the y axis). What is the slope of Cat's indifference curve that...

  • Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x...

    Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x , price of Y is P Y and the consumer income is m. a. Derive and interpret the budget constraint and its slope. b. If slope is -3, how will you interpret it? c. Suppose a government wants to discourage the excessive consumption of X and decides to impose a tax t 1 if someone consume more than X 1 but less than X...

  • Suppose that a consumer consumes only food(F) and entertainment(E). Suppose PF = $5, PE = $10,...

    Suppose that a consumer consumes only food(F) and entertainment(E). Suppose PF = $5, PE = $10, I = $600. Suppose the utility function is u(F, E) = F E. (a) Find the optimal bundle. (b) Suppose now that the consumer has to have a minimum of 50 units of F, and a maximum of 20 units of E. Draw the new budget constraint and find the new optimal bundle.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT