Sophia spends all her money on gummy worms and apps for her smartphone. A pound of...

Sophia spends all her money on gummy worms and apps for her smartphone. A pound of gummy worms and a smartphone app each cost $2. Sophia’s parents give her an allowance of $80 and 2 pounds of gummy worms each month. Draw her opportu- nity set, assuming that she cannot sell the gummy worms to her friends. How does her opportunity set change if she can sell the gummy worms at the market price of $2?

Solutions

Expert Solution

Rahul Sunny answered 4 months ago

Next > < Previous

Related Solutions

Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B,...

Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B, S) = 2B0.5S 0.5 . Her income is $150. Price of shoes is pS = 2. Price of bags depends on the number of bags purchased. Bags cost $5 each if she purchases between 1 and 8 bags. If she purchases more than 8 bags, the price falls to $2 for all subsequent books. (a) Draw Kleopatra's budget constraint where bag is on the...

Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B,...

Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B, S) = 2B^0.5S^0.5 . Her income is $150. Price of shoes is pS = 2. Price of bags depends on the number of bags purchased. Bags cost $5 each if she purchases between 1 and 8 bags. If she purchases more than 8 bags, the price falls to $2 for all subsequent books. (a) Draw Kleopatra's budget constraint where bag is on the horizontal...

Maria spends all her money on food and clothing. When the price of clothing decreases, she...

Maria spends all her money on food and clothing. When the price of clothing decreases, she ends up buying more clothing. (Note: In the following questions, be clear about the direction of the effect as increasing, decreasing, or ambiguous. And explain completely and explain the possible scenarios) 1. Does the substitution effect cause her to buy more or less clothing? Explain. 2. Does the income effect cause her to buy more or less clothing? Explain. 3. Under what circumstances will...

Helen spends all her money on food and clothing. When the price of clothing decreases, she...

Helen spends all her money on food and clothing. When the price of clothing decreases, she ends up buying more clothing. (Note: In the following questions, be clear about the direction of the effect as increasing, decreasing, or ambiguous. And explain completely and explain the possible scenarios) 1. Does the substitution effect cause her to buy more or less clothing? Explain. 2. Does the income effect cause her to buy more or less clothing? Explain. 3. Under what circumstances will...

Jessica spends all her money on bags(B) and shoes(S). Her utility function is U(B,S) = 2...

Jessica spends all her money on bags(B) and shoes(S). Her utility function is U(B,S) = 2 * B^0.5 * S^0.5 . Her income is 150$. Price of shoes is Ps = 2. Price of bags depends on the number of bags purchased. Bags cost $5 each if she purchases between 1 and 8 bags. If she purchases more than 8 bags, the price falls to $2 for all subsequent bags. a) Draw Jessica's budget constraint where bag is on the...

Sophia inherits inherited money from her grandparents. She inherits $100,000 from her grandparents, today. She has...

Sophia inherits inherited money from her grandparents. She inherits $100,000 from her grandparents, today. She has exactly 20 years to retire and she decided to put the entire amount into 20 years, 4% annual interest annuity. A) Assume that she did not deposit any additional amount into this account, compute your account balance by the time she retires. Please compute the problem using a scientific calculator (not a financial one) using the appropriate formulas and show your calculations step by...

Michelle spends all her money on food and clothing. When the price of clothing decreases, she buys more clothing.

Michelle spends all her money on food and clothing. When the price of clothing decreases, she buys more clothing.In the diagram to the right, the substitution effect is defined by the movement from point :a. A to Bb. A to Cc. B to Cd. C to DMichelle spends all her money on food and clothing. When the price of clothing decreases, she buys more clothing. In the diagram to the right, the substitution effect is defined by the movement from...

Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas...

Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 30 for the last pound of mangos purchased and 8 for the last pound of bananas. To maximize his utility, Robinson should buy a. only bananas. b. more mangos and fewer bananas. c. more bananas and fewer mangos. d. the present combination of goods.

Jane spends all of her $200 weekly income on two goods, X and Y. Her utility...

Jane spends all of her $200 weekly income on two goods, X and Y. Her utility function is given by U(X,Y) = 2XY, If the price of X = $4/ unit and the price of Y = $10 a unit, how much of Y should she buy?

Margaret spends all of her income on t-shirts (x1) and shoes (x2). Her preferences can be...

Margaret spends all of her income on t-shirts (x1) and shoes (x2). Her preferences can be represented by the utility function u (x1, x2) = 2√x1x2. (a) Derive the demand functions for t-shirts and shoes in terms of the price of t-shirts (p1), the price of shoes (p2), and income (m). Show your result on a graph. (b) Draw the Income Offer Curve and Engel Curves (one for each good). (c) Draw the Price Offer Curve and Demand Curves. (d)...

Subjects