. A family in Ethiopia has $100 to spend on food and all other goods for...
. A family in Ethiopia has $100 to spend on food and all other goods for the entire year of 2018. The price of food is $2.00 per kilogram (let’s assume that all food is the same). The price of all other goods is $1.00 per unit.
- Write the equation for the household’s budget constraint for the year, with income on the left-hand side of the equation.
- Fill in the following chart so that the quantity purchased on each horizontal line meets the budget constraint.
Food (Qf) Other Goods (Qo)
0 __________
_________ 10
___________ 20
30 ____________
____________ 0
c. Solving for Qowhat is the household’s budget line equation? Solve for Qofrom the budget constraint, i.e. rearrange the equation to put Qoon the left hand side.(no numbers needed for Qoor Qf)
d. What is the slope of the budget line? What does its value mean in economic terms? (answer both in general terms and using specific numbers given in this problem)
e. Graph the budget line, using the graphing paper below. Put food on the horizontal axis and other goods on the vertical axis.
Homework Answers
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. A family in Ethiopia has $100 to spend on food and all other
goods for...
Consider someone who has an income of $100 and consumes food and other goods. The two...
Consider someone who has an income of $100 and consumes food and other goods. The two goods are measured so that the prices are each $1.00. Depict the budget constraint on a graph with food on the horizontal axis and other goods on the vertical axis. What are the intercepts and the slope? Now suppose the government is considering a transfer program to encourage people to consume more food. Specifically, the government offers 20 units of food for free. Suppose...
Suppose a family spends their income on two things: education (S) and all other goods, (X)....
Suppose a family spends their income on two things: education (S) and all other goods, (X). The family earns $60,000 a year. A unit of education costs $10,000 and a unit of other goods costs $15,000. a) Write the equation for the family’s budget constraint. b) Draw the family’s budget constraint. Put education spending on the x-axis and spending on all other goods on the y-axis. c) The local government opens a public school, which offers $20,000 worth of education...
4. Suppose a consumer has a budget of S500 to spend on goods X and Z...
4. Suppose a consumer has a budget of S500 to spend on goods X and Z that have prices p, =5 and pz =10. a. Write the equation for the budget constraint. b. Draw the budget line, placing good X on the horizontal axis and Z on the vertical axis. c. What is the slope of the budget constraint line?
2. Suppose that Jesse earns $1,000 per month which she allocates between food and other goods....
2. Suppose that Jesse earns $1,000 per month which she allocates between food and other goods. Assume that the average price of a unit of food is $5 and the price of other goods as $1. Currently, she maximizes her utility by purchasing 25 units of food each month. [5] a. With other goods on the y-axis and food on the x-axis, illustrate Jesse's budget constraint and an indifference curve at her optimal bundle. Label all relevant values. b. In...
Suppose Peter has $800,000 to spend on a house and “other goods” (denominated in dollars). The...
Suppose Peter has $800,000 to spend on a house and “other goods” (denominated in dollars). The price of 1 square foot of housing is $300, and Peter chooses to purchase a house of 2,000 square feet in size. Assume that houses do not differ in quality: their price is solely determined by their size. Also, assume throughout that Peter spends money on housing solely for its consumption value, not as part of his investment strategy, and that Peter has well-behaved,...
Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and chees...
Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 10 hours and for a cheese is 10 hours. In New Zealand the unit labour requirement for a beer is 4 hour and for a cheese is 1 hour. Australia has an endowment of 2000 hours of labour. New Zealand has an endowment of 400 hours of labour. 1 Draw...
Suppose a consumer has budget of $120 per week to spend on food. Consumer can choose...
Suppose a consumer has budget of $120 per week to spend on food. Consumer can choose to eat at restaurants (R), in which case he spends about $20 per meal (P $20), or spend his money on All-Other-Food (PAOP $1) 2. a. Ilustrate consumer's budget line. Plot R on the horizontal axis. b. If consumer's utility function is U-R AOF, what will be his optimal bundle? What would be the value of his utility at optimal bundle? How much money...
Brothers Victor and Logan each have $100 to spend on comic books (X) and all other goods (Y). Com...
Brothers Victor and Logan each have $100 to spend on comic books (X) and all other goods (Y). Comic books cost $5 each, and all other goods (AOG) have a composite price of $1 each. Assume that their preferences are represented by convex indifference curves. Their grandfather wants to give each boy either 5 comic books or $25 for their birthday. For the analyses below, include a budget line, indifference curve, and optimal choice for each option (comic books and...
Quick intuition check via True or False Questions 1. 2. If all prices double and income...
Quick intuition check via True or False Questions 1. 2. If all prices double and income triples, then the budget line will become steeper There are two goods. You know how much of good 1 a consumer can afford if she spends all of her income on good 1. If you knew the ratio of the prices of the two goods, then you could draw the consumer's budget line without any more information. lf good l is on the horizontal...
Notice that some of the questions (a, b, c, d) include several steps to solve the...
Notice that some of the questions (a, b, c, d) include several
steps to solve the problem.
No utility function was provided for this problem. However,
it's supposed to be solvable anyway.
It
won't let me leave a comment so I'm gonna ask the question here
(and hope that you see it). Is it possible for you to do the parts
of the problem that doesn't require the indifference curve?
5. Sarah the graduate student lives off ravioli, R, and...
4. Suppose a consumer has a budget of S500 to spend on goods X and Z that have prices p, =5 and pz =10. a. Write the equation for the budget constraint. b. Draw the budget line, placing good X on the horizontal axis and Z on the vertical axis. c. What is the slope of the budget constraint line?
2. Suppose that Jesse earns $1,000 per month which she allocates between food and other goods. Assume that the average price of a unit of food is $5 and the price of other goods as $1. Currently, she maximizes her utility by purchasing 25 units of food each month. [5] a. With other goods on the y-axis and food on the x-axis, illustrate Jesse's budget constraint and an indifference curve at her optimal bundle. Label all relevant values. b. In...
Suppose a consumer has budget of $120 per week to spend on food. Consumer can choose to eat at restaurants (R), in which case he spends about $20 per meal (P $20), or spend his money on All-Other-Food (PAOP $1) 2. a. Ilustrate consumer's budget line. Plot R on the horizontal axis. b. If consumer's utility function is U-R AOF, what will be his optimal bundle? What would be the value of his utility at optimal bundle? How much money...
Quick intuition check via True or False Questions 1. 2. If all prices double and income triples, then the budget line will become steeper There are two goods. You know how much of good 1 a consumer can afford if she spends all of her income on good 1. If you knew the ratio of the prices of the two goods, then you could draw the consumer's budget line without any more information. lf good l is on the horizontal...
Notice that some of the questions (a, b, c, d) include several
steps to solve the problem.
No utility function was provided for this problem. However,
it's supposed to be solvable anyway.
It
won't let me leave a comment so I'm gonna ask the question here
(and hope that you see it). Is it possible for you to do the parts
of the problem that doesn't require the indifference curve?
5. Sarah the graduate student lives off ravioli, R, and...
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