What is big deal about having more or less consumer surplus

Reference no: EM131258960

Assignment

The price of a movie ticket is $10.00. At that price you choose to see 20 movies a year. The price elasticity of demand has been determined to be (in absolute value) 1.5. Unfortunately for you, movie ticket prices have increased to $15.

a. Use indifference curve analysis to show the initial utility maximization point. Label this point "A". Label the second utility maximization point "B". Be sure to determine the new utility maximization quantity and label.

b. Derive the equation of the demand curve corresponding to the utility maximization positions from part a. Label the utility maximization points "A" and "B" and the intercepts.

c. Calculate the change in consumer surplus due to the increased price of movies. What is the significance of this change in consumer surplus? In other words, what is the big deal about having more or less consumer surplus?

d. Illustrate and explain the income and substitution effect associated with this price change.

Reference no: EM131258960

Questions Cloud

Determine the ethics of the term paper service : Write a paper addressing the issues - Is there anything unethical about this service in general and determine the ethics of the term paper service.

Canonical decision problem : Canonical Decision Problem Susan Smart, a recent graduate of MIT, has decided to start her own business, Frill Less Internet Provider (FLIP). She is offering small businesses and residential customers Internet access, providing a fast and convenie..

What is matts new utility max position : The government decides to implement a per unit subsidy for food = $2. What is Matt's new utility max position? Illustrate graphically and include relevant numbers.

Explain the purpose of the survey : Discuss the preliminary design issues you experienced in creating your survey. Describe the specific instructions for administering, scoring, and interpreting your survey.

What is big deal about having more or less consumer surplus : Calculate the change in consumer surplus due to the increased price of movies. What is the significance of this change in consumer surplus? In other words, what is the big deal about having more or less consumer surplus?

Dealing with missing data : Suppose that you use a Gaussian discriminant classifier, in which you model explicitly P(y = 1) (using a binomial) and P(x|y = 0) and P(x|y = 1). The latter have distinct means µ0 and µ1, and a shared covariance matrix Σ (a frequent assumption in ..

Explain initial position within context of marginal utility : Write the equation of a line that represents the budget constraint. Clearly interpret the slope. Explain the initial position within the context of marginal utility per last dollar spent on each good. Show graphically.

Did the literature review consistently set up the research : In order to write a review of the research article you are to use the outline listed below. You need to express some opinions about the adequacy or appropriateness of the author(s)'s effort in each of the main sections. For example, did the lite..

Consider three different processors : Consider three different processors P1, P2, and P3 executing the same instruction set. [10 points] P1 has a 3 GHz clock rate and a CPI of 1.5.

User Account

All Pages