Essay
Eliza consumes 12 cappuccinos and 8 apple turnovers per week.The price of a cappuccino is $4 each and apple turnovers are $1 each.
a.What is the amount of income allocated to cappuccino and apple turnover consumption?
b.What is the price ratio (the price of cappuccinos relative to the price of apple turnovers)?
c.Explain the meaning of the price ratio you computed.
d.If Eliza maximize utility, what is the ratio of the marginal utility of cappuccinos to the marginal utility of apple turnovers?
e.If the price of apple turnovers falls, will Eliza consume more apple turnovers, fewer apple turnovers, or the same amount of apple turnovers? Explain your answer using the rule of equal marginal utility per dollar.
Correct Answer:
Verified
a. Income = $56
b. Price of cappuccino ...View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Correct Answer:
Verified
b. Price of cappuccino ...
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q294: Economists assume that the goal of consumers
Q295: One reason college students do not study
Q296: Terence has $50 per week to spend
Q297: If a consumer receives 20 units of
Q298: Grace Makutsi finally bought a pair of
Q299: Which of the following is used to
Q300: Sunk costs<br>A)are costs associated with repairing something
Q302: What is the endowment effect?<br>A)the tendency of
Q303: Consider a downward-sloping demand curve.When the price
Q304: Figure 10-7<br> <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB4193/.jpg" alt="Figure 10-7