ECO200Y5 Study Guide - Final Guide: Demand Curve, Classical Swine Fever, The Residents

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2 Sep 2014

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Tutorial 3 - wednesday - may 28, 2014 - 4pm - 5pm. What do you know about her new budget constraint? (c) use your graph to show why paula will choose to consume more l and less t given her new budget constraint. The residents of usurp consume only pork chops (x) and coca-cola (y). The utility function for the typical resident of usurp is given by. In 2009, the price of pork chops in usurp was each, cokes were also each. The typical resident consumed 40 pork chops and 40 cokes (saving in impossible in usurp). In 2010, swine fever hit usurp and pork chop prices rose to ; the coke price remained unchanged. At these new prices, the typical usurp resident consumed 20 pork chops and 80 cokes. Explain the differences intuitively and with a graph. Tom, dick, and harry constitute the entire market for scrod.

Related Questions

Currently, the price of consuming housing x1 is lowered by the fact that home mortgage interest is tax deductible. Suppose the government proposed to eliminate this implicit subsidy of your housing consumption, raising the price from (p1-s) to p1. At the same time, the government lowers the tax on other consumption x2, lowering the price from (p2 + t) to p2.

a) Write down your original budget constraint assuming the consumer has income I.

b) Suppose the utility function u(x1, x2) = (1/3) lnx1 +lnx2 captures your tastes, and suppose I = 10, 000,

p1 = 10, p2 = 1, s = 6, and t = 1. Write out the utility maximization problem for this consumer

prior to any policy change.
c) How much housing and other goods will this consumer consume prior to any policy change? (show process)

d) When the policy change goes into effect, will this consumer still be able to afford the bundle you derived in (c)?

e) When the policy change goes into effect, what bundle will the consumer consume?

coralbuffalo772

Imagine that you consume only two goods: bagels and coffee. Our utility function is characterized by

U(Qc, Qb)=Qc^025 * Qb^0.75

The price of bagels is $5 and the price of coffee is $2 and your income is $1,000

i. Find out our initial consumption bundle and the utility it provides.

ii. What share of your income do you spend on each good?

iii. One day you wake up to the horrible news that the price of coffee increased to $3. What is the new optimal consumption bundle?

iv. Your mom is concerned with your ability to focus and wants to give you enough money so you can afford your original level of consumption at the new prices. How much money should your mom give you?

v. Your dad is upset that your mom will give you too much money and instead he wants to give you enough money to preserve your utility. Finding the substitution bundle, find out how much money your dad will give you.

vi. Who do you love more?

vii. Graph this scenario. Make sure to include the 2 budget constraints that reflect the amounts received from each parent.

burgundychinchilla896

Michael spends all of his income on coffee and donuts. A coffee costs $2.50 and a donut costs $2.00. At his current consumption level, the marginal utility for coffee is 30 utils, and the marginal utility for a donut is 60 utils. Which statement best describes what Michael needs to do to maximize his utility?

Question 1 options:

1)	buy less of both coffee and donuts.

2)	buy less coffee and more donuts.

3)	buy more coffee and less donuts.

4)	spend the same amount on coffee as he does on donuts.

Question 2

What is it called when the marginal utility derived from the last dollar spent on each good is the same across all goods and the last dollar spent uses all of the available budget for the purchase of those goods?

Question 2 options:

1)	the optimal consumption bundle.

2)	the optimal production bundle.

3)	diminishing marginal utility.

4)	optimal point.

Question 3 (1 point)

What does the economic theory of marginal utility infer?

Question 3 options:

1)	consumers naturally know which consumption choices will maximize their utility.

2)	consumers who watch market trends are better at maximizing their utility than are those who do not watch those trends.

3)	one cannot maximize utility without taking an economics class that explains utility theory.

4)	one cannot maximize utility without doing the math of calculating the ratios of marginal utility divided by price.

Question 4

Kate is addicted to chocolate and does not care how much it costs. In fact, she spends more than $20 a week on chocolate. What can be concluded about elasticity in her buying decisions?

Question 4 options:

1)	Her income elasticity of demand for chocolate is equal to one.

2)	Her income elasticity of demand for chocolate is equal to zero.

3)	Her price elasticity of demand for chocolate is equal to one.

4)	Her price elasticity of demand for chocolate is equal to zero.

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Question 5 (1 point)

Why does the demand for a good become relatively more elastic?

Question 5 options:

1)	substitutes for the good become more available.

2)	substitutes for the good become less available.

3)	the good becomes more of a necessity.

4)	the time allowed for adjustment is shortened.

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Question 6 (1 point)

Assume the price of chicken per pound is $3.49 and that Americans purchase 10 million pounds per chicken every month. If the price of chicken increases to $5.49 per pound, identify what will occur to consumer surplus?

Question 6 options:

1)	consumer surplus increases.

2)	consumer surplus decreases.

3)	consumer surplus creates incentive to save.

4)	consumer surplus creates incentive to spend.

Question 7 (1 point)

What is another name for the difference between the price that consumers are willing to pay for a good and a lower price that they may actually have to pay?

Question 7 options:

profit.

revenue.

3)	consumer utility.

4)	consumer surplus.

Question 8

Adam, Brian, Robert, and Sam all want to attend a football game. The admission price is $48. Adam is willing to pay $59 for the ticket. Brian is willing to pay $39. Robert is willing to pay $45, and Sam is willing to pay $55. Based on this information, who will go to the game?

Question 8 options:

1)	Adam, Brian, Robert, and Sam.

2)	Brian and Robert.

3)	Adam and Sam.

4)	Brian, Robert, and Sam.

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Question 9 (1 point)

Lily is willing to pay $10 for one bracelet and $5 for a second. Patty is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, identify what is the total consumer surplus after Lily and Patty make their purchases?

Question 9 options:

Question 10 (1 point)

Manfred is willing to shovel one driveway for $25, a second for $30, and a third for $35. Assume that the market rate for shoveling driveways is $32. How many driveways will Manfred shovel, what will be his total revenue, and what will be his producer surplus?

Question 10 options:

1)	Manfred will shovel two driveways for a total revenue of $64 and his producer surplus will be $9.

2)	Manfred will shovel three driveways for a total revenue of $75 and his producer surplus will be $12.

3)	Manfred will shovel three driveways for a total revenue of $96 and his producer surplus will be $5.

4)	Manfred will shovel four driveways for a total revenue of $125 and his producer surplus will be $18.

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Question 11 (1 point)

What would the difference between the price that producers receive and the lower price at which they are willing to sell the good be called?

Question 11 options:

1)	producer shortage.

2)	producer surplus.

3)	consumer shortage.

4)	consumer surplus.

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Question 12 (1 point)

What will happen when there is an increase in the price of eBook downloads?

Question 12 options:

1)	It reduces the marginal utility derived from each dollar spent on eBooks.

2)	It reduces the marginal utility derived from each hardcopy book purchased.

3)	There will not be a substitution effect.

4)	There will not be a change in the number of eBooks in the set of consumption possibilities.

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Question 13 (1 point)

When is price elasticity of demand utilized to measure how an individual changes the quantity they demand?

Question 13 options:

1)	when supply changes.

2)	when product quality changes.

3)	when marketing changes.

4)	when price changes.

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Question 14 (1 point)

Assume Mary consumes only tea and pastries. A cup of tea costs 5 euros and a pastry costs 8 euros. Her weekly income is 450 euros. Mary always drinks 2 cups of tea for every pastry she consumes. What is Maryâs optimal weekly consumption bundle?

Question 14 options:

1)	25 cups of tea and 50 pastries.

2)	50 cups of tea and 25 pastries.

3)	58 cups of tea and 20 pastries.

4)	60 cups of tea and 30 pastries.

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Question 15 (1 point)

When is producer surplus a positive value?

Question 15 options:

1)	the price the producer is willing to charge equals the market price.

2)	there is no tax applied to the good.

3)	the price the producer is willing to charge is less than the market price.

4)	the price the producer is willing to charge is greater than the market price.

ECO200Y5 Study Guide - Final Guide: Demand Curve, Classical Swine Fever, The Residents

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