Reference no: EM131392171
You must label your graph, identify key points and quantities, and answer the question to receive full credit. Use the numbers in the question as appropriate in your graphs.
Consider a consumer that consumes only two goods, clothing and food. For this consumer, clothing is a normal good and Food is an inferior good. The consumer has weekly income of $400. In the initial situation, the price of clothing is $20/unit and the price of food is $5/unit. In the initial situation, the consumer spends 3/4 of her income on food and 1/4 on clothing.
a) Please use an indifference curve-budget constraint diagram to draw the consumer decision in the initial situation. Label any key points.
b) Now consider an increase in the price of clothing to $40/unit. Show the new optimum decision of the consumer. Please state and show the substitution effect, the income effect and the total effect of the price change on the consumer’s demand for both clothingand food.
c) Please show the effect of the increase in the price of clothing on the demand curve for clothing and the demand curve for food. If all consumers are the same (and the supply curve for food is unchanged), what will happen to the equilibrium price of food when the price of clothing increases?
|
What is matching efficiency technology
: Why are revisions such as levying special tariffs and quotas on Mexican goods, and taxes on goods produced by U.S. companies in Mexico unfavorable to Mexico? What is the fallacy behind Trump’s pledge to bring manufacturing jobs back home from Asia? w..
|
|
Import restrictions on a product protect domestic industries
: Import restrictions on a product protect domestic industries by
|
|
Example of a practical constraint on trade
: Which of the following statements is an example of a practical constraint on trade?
|
|
Calculate and graph the effects of an import subsidy
: A small nation is unable to affect world price. It imports peanuts at the price of $10 per bag. The deman curve is D=400-10P and the supply curve is S=50+5 P. Calculate and graph the effects of an import subsidy of $4 pe unit.
|
|
Use an indifference curve-budget constraint diagram
: Consider a consumer that consumes only two goods, clothing and food. For this consumer, clothing is a normal good and Food is an inferior good. Please use an indifference curve-budget constraint diagram to draw the consumer decision in the initial si..
|
|
Subsideis each cause net welware losses
: If tariffs, quotas, and subsideis each cause net welware losses, why are they so common, especially in agriculture among industrialized countries such as the United States and the European Union?
|
|
The banking system currency
: Suppose that the banking system currency has no excess reserves and that a bank receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the BANKING SYSTEM can lend out?
|
|
Identify the arguments against free trade
: Firm A and Firm B operate retail malls. Both are trying to determine whether to increase advertising budgets during the holiday season or to keep them constant. Because of contract cycles, Firm A will have to make a commitment regarding an advertisin..
|
|
What amount of the gain on the sale does sarah recognize
: Sarah (single) purchased a home on January 1, 2008 for $600,000. She eventually sold the home for $790,000. Sarah used the property as a vacation home through December 31, 2014. She then used the home as her principal residence from January 1, 2015 u..
|