Can someone check my work ? Is this correct ?
CHAPTER 4 HOMEWORK You should show detailed calculations/processes and explanations. Answer itself is NOT sufcient. 3. A consumer must divide $600 between the consumption of product X and product K The relevant market prices are P2: = $10 and g; $40. a. Write the equation for the consumer's budget line. 10X +40Y = 600 b. Elustrate the consumer's opportunity set in a careilly labeled diagram Goods Y 10X + 40Y = 500 Y = 600I40 = 15 \\B Budget Line x = 600/10 = 60 Goodsx I 0 3 D (27 D c. Show how the consumer's opportunity set changes when the price of goodX increases to $20. How does this change alter the market rate of substitution between goods X and Y? GoodY | 5 Budgetne JU w 1D Good x The new budget constraint is 20X + 40Y = 600 A consumer with $600 can consume a maximum of 30 units of good X [600/ 2 0) and a maximum of 15 units of good Y [600/40] First MRS = -Px/Ex= 10/40 = -0.25 Second MRS = 20/40 = -0.50 (increase) Before the price increase, the consumer hast to forego 4units of X to consume 1 unit of Y. Now, to consume 1 unit of Y a consumer h_as_ _to_ forego 2 units of X 5. Provide an intuitive explanation for why a \"buy one, get one ee\" deal is not the same as a 'han-price\" sale. \"Buy one, get one free" deal is different om \"half-price\" in that once consumers purchase a half price, they have more money left to buy something else. With buy one get one, they get two items for the price of one but likely won't purchase anything else because they have less disposable income. 7. A consumer must spend all of her income on two goods (X and Y). In each of the following scenarios, indicate whether the equilibrium consumption of goodsX and Ywill increase or decrease. Assume goodX is a_nnorrnal good and good Yis g inferior good. a. Income doubles. The consumer uses more of the normal good and less of the inferior good with her higher income. This means that the quantity consumed of normal good X increases. b. Income quadruples and all prices double. In this case the consumer spends the whole increase of income on buying more of the normal good X and reduces the use of the other inferior good Y 0. Income and all prices quadruple. In the scenario the consumer spends their income on buying the same quantity of the normal good X and inferior good Y as they did previously due to the net not changing. (1. Income is halved and all prices double. In this case the consumer's income drops to 1/4 of where it was previously which leads the consumer to reducing their consumption. Because the income effect for inferior goods is negative the consumer then buys less of the normal good X and more of inferior good Y
