NAME (b)If he accepts 15 sacks of garbage, how many video cassettes can he 5 (c)Write down an equation for his budget line. 6C-2G=0 (d) Draw Edmund's budget line and shade in his budget set 5 Video cassettes 2.8(0) If you think Edmund is odd, consider his brother Emmett Emmett consumes speeches by politicians and university administrators He is paid SI per hour for listening to politicians and $2 per hour fo listening to university administrators. (Emmett is in great demand to help fill empty chairs at public lectures because of his distinguished appearance and his ability to refrain from making rude noises )Emmett consumes one good for which he must pay. We have agreed not to disclose what that good is, but we can tell you that it costs $15 per unit and we shall call it Good X. In addition to what he is paid for consuming speeches Emmett receives a pension of $50 per week Administrator speeches Politician speeches
NAME 11 (b) If he accepts 15 sacks of garbage, how many video cassettes can he buy? 5. (c) Write down an equation for his budget line. 6C − 2G = 0. (d) Draw Edmund’s budget line and shade in his budget set. 0 5 10 15 20 5 10 15 Video cassettes Garbage 20 Budget Line Budget Set 2.8 (0) If you think Edmund is odd, consider his brother Emmett. Emmett consumes speeches by politicians and university administrators. He is paid $1 per hour for listening to politicians and $2 per hour for listening to university administrators. (Emmett is in great demand to help fill empty chairs at public lectures because of his distinguished appearance and his ability to refrain from making rude noises.) Emmett consumes one good for which he must pay. We have agreed not to disclose what that good is, but we can tell you that it costs $15 per unit and we shall call it Good X. In addition to what he is paid for consuming speeches, Emmett receives a pension of $50 per week. 0 25 50 75 100 25 50 75 Politician speeches Administrator speeches 100
12 BUDGET CONSTRAINT (CI (a) Write down a budget equation stating those combinations of the three commodities, Good X, hours of speeches by politicians(P), and hours of speeches by university administrators(A)that Emmett could afford t consume per week. 15X-1P-2A=50 (b)On the graph above, draw a two-dimensional diagram showing the locus of consumptions of the two kinds of speeches that would be possible for Emmett if he consumed 10 units of Good X per week 2.9(0)Jonathan Livingstone Yuppie is a prosperous lawyer. He has, in his own words, "outgrown those confining two-commodity lim its Jonathan consumes three goods, unblended Scotch whiskey, de- signer tennis shoes, and meals in French gourmet restaurants. The price of Jonathan's brand of whiskey is $20 per bottle, the price of designer tennis shoes is $80 per pair, and the price of gourmet restaurant meals is 50 per meal. After he has paid his taxes and alimony, Jonathan has $400 a week to spend (a) Write down a budget equation for Jonathan, where W stands for the number of bottles of whiskey, T stands for the number of pairs of tennis shoes, and M for the number of gourmet restaurant meals that he consumes. 20W+ 80T+50M=400 (b)Draw a three-dimensional diagram to show his budget set. Label the intersections of the budget set with each axis (c)Suppose that he determines that he will buy one pair of designer tennis shoes per week. What equation must be satisfied by the combinations of restaurant meals and whiskey that he could afford? 20W+50M= 320. 2.10(0) Martha is preparing for exams in economics and sociology. She has time to read 40 pages of economics and 30 pages of sociology. In the same amount of time she could also read 30 pages of economics and 60 pages of sociology
12 BUDGET CONSTRAINT (Ch. 2) (a) Write down a budget equation stating those combinations of the three commodities, Good X, hours of speeches by politicians (P), and hours of speeches by university administrators (A) that Emmett could afford to consume per week. 15X − 1P − 2A = 50. (b) On the graph above, draw a two-dimensional diagram showing the locus of consumptions of the two kinds of speeches that would be possible for Emmett if he consumed 10 units of Good X per week. 2.9 (0) Jonathan Livingstone Yuppie is a prosperous lawyer. He has, in his own words, “outgrown those confining two-commodity limits.” Jonathan consumes three goods, unblended Scotch whiskey, designer tennis shoes, and meals in French gourmet restaurants. The price of Jonathan’s brand of whiskey is $20 per bottle, the price of designer tennis shoes is $80 per pair, and the price of gourmet restaurant meals is $50 per meal. After he has paid his taxes and alimony, Jonathan has $400 a week to spend. (a) Write down a budget equation for Jonathan, where W stands for the number of bottles of whiskey, T stands for the number of pairs of tennis shoes, and M for the number of gourmet restaurant meals that he consumes. 20W + 80T + 50M = 400. (b) Draw a three-dimensional diagram to show his budget set. Label the intersections of the budget set with each axis. M T W 8 5 20 (c) Suppose that he determines that he will buy one pair of designer tennis shoes per week. What equation must be satisfied by the combinations of restaurant meals and whiskey that he could afford? 20W +50M = 320. 2.10 (0) Martha is preparing for exams in economics and sociology. She has time to read 40 pages of economics and 30 pages of sociology. In the same amount of time she could also read 30 pages of economics and 60 pages of sociology
(a) Assuming that the number of pages per hour that she can read of either subject does not depend on how she allocates her time, how many pages of sociology could she read if she decided to spend all of her time on sociology and none on economics? 150 pages.(Hint:You have two points on her budget line, so you should be able to determine the entire line (b) How many pages of economics could she read if she decided to spend all of her time reading economics? 50 pages 2.11(1)Harry Hype has $5,000 to spend on advertising a new kind of dehydrated sushi. Market research shows that the people most likely to buy this new product are recent recipients of M. B A. degrees and lawyers who own hot tubs. Harry is considering advertising in two publications a boring business magazine and a trendy consumer publication for people who wish they lived in California Fact 1: Ads in the boring business magazine cost S500 each and ads in he consumer magazine cost $250 each Fact 2: Each ad in the business magazine will be read by 1, 000 recent M.B.A. 's and 300 lawyers with hot tubs Fact 3: Each ad in the consumer publication will be read by 300 recent M. B A's and 250 lawyers who own hot tubs Fact 4: Nobody reads more than one ad, and nobody who reads one magazine reads the other (a) If Harry spends his entire advertising budget on the business pub- lication, his ad will be read by 10, 000 recent M.B.A's and by 3, 000 lawyers with hot tubs (b)If he spends his entire advertising budget on the consumer publication his ad will be read by 6, 000 recent M B.A.'s and by 5,000 vvers (c) Suppose he spent half of his advertising budget on each publication His ad would be read by 8, 000 recent M B.A.'s and by 4, 000 lawyers with hot tubs (d) Draw a"budget line"showing the combinations of number of readings by recent M.B. A's and by lawyers with hot tubs that he can obtain if he spends his entire advertising budget. Does this line extend all the way No. Sketch, shade in, and label the budget set, which includes all the combinations of MBAs and lawyers he can reach if he spends no more than his budget
NAME 13 (a) Assuming that the number of pages per hour that she can read of either subject does not depend on how she allocates her time, how many pages of sociology could she read if she decided to spend all of her time on sociology and none on economics? 150 pages. (Hint: You have two points on her budget line, so you should be able to determine the entire line.) (b) How many pages of economics could she read if she decided to spend all of her time reading economics? 50 pages. 2.11 (1) Harry Hype has $5,000 to spend on advertising a new kind of dehydrated sushi. Market research shows that the people most likely to buy this new product are recent recipients of M.B.A. degrees and lawyers who own hot tubs. Harry is considering advertising in two publications, a boring business magazine and a trendy consumer publication for people who wish they lived in California. Fact 1: Ads in the boring business magazine cost $500 each and ads in the consumer magazine cost $250 each. Fact 2: Each ad in the business magazine will be read by 1,000 recent M.B.A.’s and 300 lawyers with hot tubs. Fact 3: Each ad in the consumer publication will be read by 300 recent M.B.A.’s and 250 lawyers who own hot tubs. Fact 4: Nobody reads more than one ad, and nobody who reads one magazine reads the other. (a) If Harry spends his entire advertising budget on the business publication, his ad will be read by 10,000 recent M.B.A.’s and by 3,000 lawyers with hot tubs. (b) If he spends his entire advertising budget on the consumer publication, his ad will be read by 6,000 recent M.B.A.’s and by 5,000 lawyers with hot tubs. (c) Suppose he spent half of his advertising budget on each publication. His ad would be read by 8,000 recent M.B.A.’s and by 4,000 lawyers with hot tubs. (d) Draw a “budget line” showing the combinations of number of readings by recent M.B.A.’s and by lawyers with hot tubs that he can obtain if he spends his entire advertising budget. Does this line extend all the way to the axes? No. Sketch, shade in, and label the budget set, which includes all the combinations of MBA’s and lawyers he can reach if he spends no more than his budget
14 BUDGET CONSTRAINT (CI (e) let M stand for the number of instances of an ad being read by an M. B.A. and L stand for the number of instances of an ad b a lawyer. This budget line is a line segment that lies on the line with equation M+2L= 16. With a fixed advertising budget, how many readings by M.B. A's must he sacrifice to get an additional reading a lawyer with a hot tub? MBASX 1000 10 Budget lin 8 Budget Set Lawyers x 1000 2.12(0) On the planet Mungo, they have two kinds of money, blue money and red money. Every commodity has two prices-a red-money price and a blue-money price. Every Mungoan has two incomes-a red income and a blue income In order to buy an object, a Mungoan has to pay that objects red- money price in red money and its blue-money price in blue money.(The shops simply have two cash registers, and you have to pay at both registers to buy an object It is forbidden to trade one kind of money for the other and this prohibition is strictly enforced by Mungo's ruthless and efficient monetary police There are just two consumer goods on Mungo, ambrosia and bubble gum. All Mungoans prefer more of each good to less The blue prices are 1 bcu(bcu stands for blue currency unit) per unit of ambrosia and 1 bcu per unit of bubble gum The red prices are 2 rcus (red currency units) per unit of ambrosia and 6 rcus per unit of bubble gum (a On the graph below, draw the red budget (with red ink)and the blue budget(with blue ink) for a Mungoan named Harold whose blue income is 10 and whose red income is 30. Shade in the " budget set containing all of the commodity bundles that Harold can afford, given
14 BUDGET CONSTRAINT (Ch. 2) (e) Let M stand for the number of instances of an ad being read by an M.B.A. and L stand for the number of instances of an ad being read by a lawyer. This budget line is a line segment that lies on the line with equation M + 2L = 16. With a fixed advertising budget, how many readings by M.B.A.’s must he sacrifice to get an additional reading by a lawyer with a hot tub? 2. 0 4 8 12 16 4 8 12 Lawyers x 1000 MBA's x 1000 16 c a b 5 10 Budget Set Budget line 2 3 6 2.12 (0) On the planet Mungo, they have two kinds of money, blue money and red money. Every commodity has two prices—a red-money price and a blue-money price. Every Mungoan has two incomes—a red income and a blue income. In order to buy an object, a Mungoan has to pay that object’s redmoney price in red money and its blue-money price in blue money. (The shops simply have two cash registers, and you have to pay at both registers to buy an object.) It is forbidden to trade one kind of money for the other, and this prohibition is strictly enforced by Mungo’s ruthless and efficient monetary police. • There are just two consumer goods on Mungo, ambrosia and bubble gum. All Mungoans prefer more of each good to less. • The blue prices are 1 bcu (bcu stands for blue currency unit) per unit of ambrosia and 1 bcu per unit of bubble gum. • The red prices are 2 rcus (red currency units) per unit of ambrosia and 6 rcus per unit of bubble gum. (a) On the graph below, draw the red budget (with red ink) and the blue budget (with blue ink) for a Mungoan named Harold whose blue income is 10 and whose red income is 30. Shade in the “budget set” containing all of the commodity bundles that Harold can afford, given
its *two budget constraints. Remember, Harold has to have enough blue money and enough red money to pay both the blue-money cost and the red-money cost of a bundle of goods Blue lines (b)Another Mungoan, Gladys, faces the same prices that Harold faces and has the same red income as Harold, but Gladys has a blue income of 20. Explain how it is that Gladys will not spend its entire blue income no matter what its tastes may be.(Hint: Draw Gladys's budget lines. The blue budget line lies strictly outside the red budget line, so to satisfy both budgets, one must be strictly inside the red budget line (c) a group of radical economic reformers on Mungo believe that the currency rules are unfair. "Why should everyone have to pay two prices for everything? they ask. They propose the following scheme. Mungo will continue to have two currencies, every good will have a blue price and red price, and every Mungoan will have a blue income and a red income But nobody has to pay both prices. Instead, everyone on Mungo must declare itself to be either a Blue- Money Purchaser(a"Blue")or a Red- Money Purchaser(a"Red")before it buys anything at all. Blues must make all of their purchases in blue money at the blue prices, spendin their blue incomes. Reds must make all of their purchases in red money, spending only their re d incomes Suppose that Harold has the same income after this reform, and that ices do not change. Before declaring which kind of purchaser it will be We refer to all Mungoans by the gender-neutral pronoun, "it. Al- though mungo has two sexes, neither of them is remotely like either of ours
NAME 15 its∗ two budget constraints. Remember, Harold has to have enough blue money and enough red money to pay both the blue-money cost and the red-money cost of a bundle of goods. 0 5 10 15 20 5 10 15 Ambrosia Gum 20 Blue Lines Red Line (b) Another Mungoan, Gladys, faces the same prices that Harold faces and has the same red income as Harold, but Gladys has a blue income of 20. Explain how it is that Gladys will not spend its entire blue income no matter what its tastes may be. (Hint: Draw Gladys’s budget lines.) The blue budget line lies strictly outside the red budget line, so to satisfy both budgets, one must be strictly inside the red budget line. (c) A group of radical economic reformers on Mungo believe that the currency rules are unfair. “Why should everyone have to pay two prices for everything?” they ask. They propose the following scheme. Mungo will continue to have two currencies, every good will have a blue price and a red price, and every Mungoan will have a blue income and a red income. But nobody has to pay both prices. Instead, everyone on Mungo must declare itself to be either a Blue-Money Purchaser (a “Blue”) or a RedMoney Purchaser (a “Red”) before it buys anything at all. Blues must make all of their purchases in blue money at the blue prices, spending only their blue incomes. Reds must make all of their purchases in red money, spending only their red incomes. Suppose that Harold has the same income after this reform, and that prices do not change. Before declaring which kind of purchaser it will be, ∗ We refer to all Mungoans by the gender-neutral pronoun, “it.” Although Mungo has two sexes, neither of them is remotely like either of ours