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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.

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Presentation on theme: "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."— Presentation transcript:

1 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 Robbins 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 Robbins 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 Robbins budget line relative to (a). e. What combination of wings and Coca-Cola should Robbin buy in (a), (b), (c), and (d)? After careful scrutiny, Robbin budgets $12/week for Wings n Suds. Consider the following:

2 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.

3 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...

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5 Betty Wilma Market

6 Assume that for a given consumer, the marginal utility of Dreyers Ice Cream is 120, and the price of Dreyers 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 Dreyers. d. cant tell; insufficient information.

7 Derive separate Engel curves for products A and B from the following indifference curve analysis. Assume P A = $1.50 and P B = $2.25. Are these goods normal or inferior? Engel Curve for Product A PointQuantity of AQuantity of BIncome D E F Engel Curve for Product B continued...

8 QAQA QBQB F E D


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