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After careful scrutiny, Robbin budgets $12/week for Wings ‘n’ Suds. Consider the following:
a. Graph and label the axes to show how much of each good Robbin is able to
buy, if the price of buffalo wing is $0.50, while the price of Coca-Cola is
$1.50.
b. In order to attract more customers to Wings ‘n’ Suds , management decides
to lower the price of Coca-Cola to a buck. Show what happens to Robbin’s
budget line compared to (a).
c. Instead of (b), assume there is a sudden shortage of buffalo wings available.
Now, Wings ‘n’ Suds has to raise the price of a wing to $3. Show how this
event changes Robbin’s budget line relative to (a).
d. Robbin, after winning $1,000 in the Texas lottery, decides that she can now
spend $36/week at Wings ‘n’ Suds. Show how this event changes Robbin’s
budget line relative to (a).
e. What combination of wings and Coca-Cola should Robbin buy in (a), (b), (c),
and (d)?
Suppose that a college student can spend $50 on entertainment. This
student derives satisfaction only from watching movies and playing video
games. The price of a movie is $5 and the price of a video game is $2.
a.
Draw the correct budget line for this student.
b.
Label the axis.
c.
Provide the numerical amounts of movies and video games at the
“extreme points.”
Betty and Wilma wish to buy T-shirts and shoes. Betty has a budget of $600,
while Wilma has a budget of $1,200. using the indifference curve analyses
given in the following, determine prices fro the T-shirts and shoes. For which
commodity can you derive a demand curve? Derive this curve for Betty and
Wilma. Finally, derive the market demand curve, assuming that they are the
only consumers.
Quantity of
T-shirts
Pairs of
Shoes
Price of
T-shirts
Price of
Shoes
Betty
Wilma
continued...
continued...
Betty
Wilma
Market
Assume that for a given consumer, the marginal utility of Dreyer’s Ice
Cream is 120, and the price of Dreyer’s is $4 per gallon. Also, assume
that the marginal utility of Blue Bell Ice cream is 160, and the price of
Blue Bell is $5 per gallon. This consumer
a. is in equilibrium.
b. should buy more Blue Bell.
c. should buy more Dreyer’s.
d. can’t tell; insufficient information.
Derive separate Engel curves for products A and B from the following
indifference curve analysis. Assume PA = $1.50 and PB = $2.25. Are
these goods normal or inferior?
Point
Quantity of A
Quantity of B
Income
D
E
F
Engel Curve for Product A
Engel Curve for Product B
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QA
E
F
D
QB