The figure below displays 6 different bundles of Good #1 and Good #2. Bundles A, B, C, D, and E are all on the same indifference curve (displayed in the figure) for an individual. This individual also prefers Bundles A, B, C, D, and E to Bundle F. The table displays the quantities of good #1 and good #2 and the MRS at each bundle. 92, m 91 Bundle A B C D E F Quantity of Good 1 4 7 10 15 22 5 Quantity of Good 2 22 15 10 7 4 5 MRS -3 -2 -1 -1/2 -1/3 -3 Suppose the individual has $20 (y = 20) to spend on a bundle of Good #1 and Good #2. When the prices of Goods #1 and #2 are both $1 (P₁ = P₂ = 1), the individual maximizes their utility by consuming Bundle C (q1 = 10, 92 = 10). If the price of good #1 increased to $3 (p₁ = 3), but both y and p₂ remained the same, the individual will maximize their utility by consuming Bundle F (q1 = 5,9₂ = 5). B) Given the information provided, which statement below is true: A. Good #1 is a normal good. B. Good #1 is an inferior good. C. Goods #1 and #2 are substitutes. D. There is not enough information to say whether one of the above statements is true. A) When faced with the new prices of p₁ = 3 and p₂ = 1, how much income would the individual need to have in order to be just as happy (i.e. receive the same utils) as they were when they had $20 of income (y = 20) and both goods cost $1 (p₁ = P₂ = 1)?
The figure below displays 6 different bundles of Good #1 and Good #2. Bundles A, B, C, D, and E are all on the same indifference curve (displayed in the figure) for an individual. This individual also prefers Bundles A, B, C, D, and E to Bundle F. The table displays the quantities of good #1 and good #2 and the MRS at each bundle. 92, m 91 Bundle A B C D E F Quantity of Good 1 4 7 10 15 22 5 Quantity of Good 2 22 15 10 7 4 5 MRS -3 -2 -1 -1/2 -1/3 -3 Suppose the individual has $20 (y = 20) to spend on a bundle of Good #1 and Good #2. When the prices of Goods #1 and #2 are both $1 (P₁ = P₂ = 1), the individual maximizes their utility by consuming Bundle C (q1 = 10, 92 = 10). If the price of good #1 increased to $3 (p₁ = 3), but both y and p₂ remained the same, the individual will maximize their utility by consuming Bundle F (q1 = 5,9₂ = 5). B) Given the information provided, which statement below is true: A. Good #1 is a normal good. B. Good #1 is an inferior good. C. Goods #1 and #2 are substitutes. D. There is not enough information to say whether one of the above statements is true. A) When faced with the new prices of p₁ = 3 and p₂ = 1, how much income would the individual need to have in order to be just as happy (i.e. receive the same utils) as they were when they had $20 of income (y = 20) and both goods cost $1 (p₁ = P₂ = 1)?
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 3SQP
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Transcribed Image Text:The figure below displays 6 different bundles of Good #1 and Good #2. Bundles A, B, C, D, and E
are all on the same indifference curve (displayed in the figure) for an individual. This individual also prefers Bundles A, B,
C, D, and E to Bundle F. The table displays the quantities of good #1 and good #2 and the MRS at each bundle.
92,
m
91
Bundle
A
B
C
D
E
F
Quantity
of Good 1
4
7
10
15
22
5
Quantity
of Good 2
22
15
10
7
4
5
MRS
-3
-2
-1
-1/2
-1/3
-3
Suppose the individual has $20 (y = 20) to spend on a bundle of Good #1 and Good #2. When the prices of Goods #1
and #2 are both $1 (P₁ = P₂ = 1), the individual maximizes their utility by consuming Bundle C (q1 = 10, 92 = 10). If
the price of good #1 increased to $3 (p₁=3), but both y and p₂ remained the same, the individual will maximize their
utility by consuming Bundle F (q1 = 5,9₂ = 5).
B) Given the information provided, which statement below is true:
A. Good #1 is a normal good.
B. Good #1 is an inferior good.
C. Goods #1 and #2 are substitutes.
D. There is not enough information to say whether one of the above statements is true.
A) When faced with the new prices of p₁ = 3 and p₂ = 1, how much income would the individual need to have in
order to be just as happy (i.e. receive the same utils) as they were when they had $20 of income (y = 20) and both
goods cost $1 (p₁ = P₂ = 1)?
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