Rick always likes to consume a cup of tea with a serving of noodles at any given time of the day. He earns a monthly allowance of 150. A cup of tea cost him Rs5 and serving of noodles cost Rs 10. Given this what will be Rick’s optimal consumption bundle?

Rick always likes to consume a cup of tea with a serving of noodles at any given time of the day. He earns a monthly allowance of 150. A cup of tea cost him Rs5 and serving of noodles cost Rs 10. Given this what will be Rick’s optimal consumption bundle?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 1SQP

See similar textbooks

Related questions

Q: Anna is a Vancouverite who starts off her day drinking either a coffee or a bubble tea. From her…

A: Given data: The total income = P15 The price of coffee = P1 The price of bubble tea = P1

Q: Amy lives in Detroit and loves to eat desserts. She spends her entire weekly allowance on yogurt and…

A: At the optimal consumption point, MRS = Price ratio Here, given value of MRS is 5. Price ratio =…

Q: Why does the optimal consumption bundle occur where the budget line is tangent to the indifference…

A: Answer: Introduction: A consumer maximizes his/her consumption where the slope of the budget line is…

Q: Suppose that you have an income of $20 to spend on sticky hands and gumballs. Both cost $1.00.…

A: Preferences: Sticky hands(y) and Gumballs (x) Total Income (M) = $20 Price of Sticky hand (Py) = $1…

Q: Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility…

A: Utility refers to the total amount of satisfaction that derived from the consumption of goods and…

Q: Q12. Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F. Suppose as Case X, Total…

Q: Susan has the option to purchase eyeglasses, E, $3 each, and orange juice, O, $1 each. Her income is…

A: Budget line shows the different combinations of two goods that a consumer can purchase with the…

Q: How does a rational consumer choose his optimal consumption bundle? Graphically show the…

A: The economics as a study is based upon the idea that the economies, and the societies around the…

Q: Suppose Maryís utility function is given as U(X; Y ) = 2X + Y . Mary has and income of 60 dollars.…

A: An important concept that measures preferences over a set of a particular good and services in terms…

Q: The Müller family has an income of € 4,000 per month. The family gives their entire income for Food…

A: Answer- "Thank you for submitting the question But, we are authorized to solve 3 sub parts.So, we…

Q: Draw Shahab's budget constraint if he has income of Rs. 1000 which he can spend on buying Pizzas and…

A: Budget constraint is the graph that represents the maximum purchases of the product and services…

Q: Suppose a student's entire weekly pocket money (income) is spent on caf eteria's fast food and hut's…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: 4. Find the marginal rate of substitution in consumption for the utility function and determine its…

A: The utility function is: Ux,y=5x2+x2y+y2+6y

Q: Jill likes to consume coffee and cream in a very particular way: with every cup of coffee she…

A: Jill is a utility maximizer. She decides to spend her income is $120 per month on coffee and cream.…

Q: Akua gets a research grant and her income increases to GHS 800 per month. What is the new equation…

A: In economics, a budget constraint represents all the combinations of goods and services that a…

Q: Ann consumes only cookies and muffins. At her current consumption bundle, her marginal utility from…

A: A buyer optimizes his/her utility measured in utils when the ratio of marginal utility of last unit…

Q: Charles lives in New York City and loves to eat desserts. He spends his entire weekly allowance on…

A: The utility is maximum at the marginal utility per dollar is equal and in other words, the MRS is…

Q: Sameena works as a free-lance worker at a software house in Rawalpindi. Suppose she keeps awake for…

A: Note: Since you've asked multiple questions, we'll only solve the first question for you. If you…

Q: How many hours will a person allocate to leisure activities if her indifference curves between…

A: If the indifference curves are concave to the origin, it implies that a worker can either work all…

Q: Saima works as a free-lance worker at a software house in Rawalpindi. Suppose she keeps awake for…

A: We are going to discuss Consumption-Leisure tradeoff to answer this question. Note: We are going to…

Q: u (x₁, x2) = min { } If the price of good 1 is $5/unit, the price of good 2 is $2/unit, and income…

A: "The utility function in the form of 'min' represents the perfect complement case. Two goods when…

Q: Bill faces the standard linear budget constraint [ PxX + PyY = 1] and has a utility %3D function for…

A: Given Budget constraint PxX+PyY=I .........(1) Utility function U(X,Y)= min(X,Y) We…

Q: lives on an island economy and consumes only coconuts. Her utility function is given by u= √C, C is…

A: Utility is the satisfaction which is derived from consumption of good.

Q: Suppose that the cost of living increases, thereby reducing the purchasing power of your income. If…

A: Income effect refers to the concept that as the change in quantity of goods and services due to a…

Q: Now suppose Henry has $900 to spend rather than $450. How will this change affect Henry's budget…

A: A straight line with a slope that shows a downwards figure and involves all the possible…

Q: What information is embodied in a budget line? What shifts occur in the budget line when money…

A: A budget line represents all the bundles i.e. combination of two goods which a consumer can buy with…

Q: Is optimal consumption basket the same as associated level of utility?

A: Consumption is the process through which institutional units consume products or services; it may be…

Q: Sameena works as a free-lance worker at a software house in Rawalpindi. Suppose she keeps awake for…

A: The labor and leisure constraint based on the availability of total work hour and the wage that the…

Q: Ms. Shanila works as a free-lance worker at a software house. Suppose she keeps awake for 100 hours…

A: Note- Since, you've asked question with multiple sub-parts, we'll only solve the first two sub-parts…

Q: In Problem 6, Elmer's utility function is U(x, ) = min{x, y²}. If the price of x is $20, the price…

A: From the utility function, we know x and y are complements Thus, x=y2 When y= 8 x = (8)2 = 64if 8…

Q: Akua is a School of Agriculture graduate and consumes 2 goods: Yoghurt and Bread. Akua also earns a…

A: The following problem has been answered as follows:

Q: Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility…

A: Hi Student, thanks for posting the question. As per the guideline we are providing answers for the…

Q: Janelle spends all of her income on songs from iTunes ($1 each) and apps ($5 each) for her iPhone.…

A: Real Income When referring to an individual's income, real revenue is the money earned after…

Q: Saima works as a free-lance worker at a software house in Rawalpindi. Suppose she keeps awake for…

A: i)

Q: Q1: Zainab has a weekly budget of $48, which she likes to spend on magazines and pies. A. If the…

A: The budget line is a graphical outline of all potential mixes of the two products that can be…

Q: Saima works as a free-lance worker at a software house in Rawalpindi. Suppose she keeps awake for…

A: The optimum level of consumption and leisure hours occurs at the point where the slope of budget…

Q: Anne likes pizza and chicken wings. Pizza costs $4 per slice, and chicken wings cost $10 for dozen.…

A: Budget line shows various combinations of 2 goods which can be used by a person given the prices of…

Q: what is the budget line for consumption and leisure if a person faces a constant wage of $5 per hour…

A: The budget line is the graphical representation that shows the combination of two products that a…

Q: 7. U(x, y) = xy. a. What is the optimal bundle of x and y? Depict this graphically and budget line…

A: Given Utility function: U(x,y)=x0.5y0.5 ... (1) Budget equation:400=10x+20y ...…

Q: What is Molly’s optimal bundle of consumption?

A: The measure that depicts the satisfaction or benefit that is being gained from the consumer from the…

Q: Q11. Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F. Suppose as Case A, Total…

A: Answer: Given, Utility function, UF,C=FC MUF=CMUC=F Total income=$120 Price of food=$2 Price of…

Q: Saima works as a free-lance worker at a software house in Rawalpindi. Suppose she keeps awake for…

A: The labor and leisure constraint based on the availability of total work hour and the wage that the…

Q: Jane insists on consuming 4 bowls of yogurt with 2 bananas. If the price of banana is $1 per unit…

A: The curve that demonstrates the relationship between income of a consumer and his demand for a…

Q: marginal utility of a hamburger is 8. s Ray maximizing utility at his current consumption basket? If…

A: Marginal utility is the added satisfaction that a consumer gets from having one more unit of a good…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

How can one's choice of purchases/consumption be infuenced by utility or marginal utility?
Dave currently consumes 10 hot dogs and 6 sodas each week. At his current consumption basket, his marginal utility for hot dogs is 5 and his marginal utility for sodas is 3. If the price of one hot dog is $1 and the price of one soda is $0.50, is Dave currently maximizing his utility? If not, how should he reallocate his spending to increase utility?
Pam has a monthly budget of £120 to be spent on T-shirts and trainers. She could afford to buy two T-shirts and two pairs of trainers. She could also buy eight T-shirts. In each case, she would be spending her entire monthly allowance. a) Calculate the price of a T-shirt and the price of a pair of trainers. Write down Pam's budget equation and draw the corresponding budget line. Mark the two consumption bundles mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. b) Discuss how Pam's budget set would change if the price of a T-shirt doubles. Show the relevant changes graphically. How should Pam's income change so that she could still afford to buy two T-shirts and two pairs of trainers? c) Discuss how Pam's budget constraint would change if the government imposed a tax of £3 per each pair of trainers.
EXERCISE 7 Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MU₁ = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so…
alex has a budget of $100 a month for a movie tickets and restaurant meals. A movie ticket will cost $10 and a restaurant meal costs $20. which of the following combinqtions is part of alexs budget constraint?
Mark consumes only cookies and books. At his current consumption bundle, his marginal utility frombooks is 10 and from cookies is 5. Each book costs $10, and each cookie costs $2. Is he maximizing his utility? Explain. If he is not, how can he increase his utility while keeping his total expenditure constant?
Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an aditional cup of coffe is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is 32. Alex Should:
Suppose you had a budget of $20.00 and the prices of a burger and a slice of pizza are $5.00 and $2.00respectively. What would be your optimal consumption bundle
Alisha has a monthly entertainment budget of rupees 1000 which she divides between going to a movie theatre or attending a music concert. The price of a movie ticket is rupees 100 and that of a concert is rupees 200. At this budget she watches 6 movies and attends 2 concert a month. Suppose now that she decides to increase her entertainment budget to rupees 1600. At the new budget she watches 4 movies and attends 6 concerts. a) Draw Income consumption curve taking movies on X axis and concerts on the Y axis . b) What is the nature of the two goods. Explain.
True/False Marginal utility keeps falling with the each additional consumption of a good or service.
Marie has a weekly budget of $2400, which she likes to spend on magazines and pies. If the price of one magazine is $40, what is the maximum number of magazines she can buy in a week? If the price of a pie is $120, what is the maximum number of pies she can buy in a week? Compute and show Marie’s budget schedule for pies and magazines. Draw Marie’s budget line with pies on the horizontal axis and magazines on the vertical axis.
Pam has a monthly budget of £120 to be spent on T-shirts and trainers. She could afford to buy two T-shirts and two pairs of trainers. She could also buy eight T-shirts. In each case, she would be spending her entire monthly allowance. Calculate the price of a T-shirt and the price of a pair of trainers. Write down Pam’s budget equation and draw the corresponding budget line. Mark the two consumption bundles mentioned above. In your graph, clearly label the axes, the budget line, and calculate the coordinates of the points of intersection of the budget line with each axis. Interpret each of those points. Discuss how Pam’s budget set would change if the price of a T-shirt doubles. Show the relevant changes graphically. How should Pam’s income change so that she could still afford to buy two T-shirts and two pairs of trainers? Discuss how Pam’s budget constraint would change if the government imposed a tax of £3 per each pair of trainers.