economics:-
11. Arnie has a job that requires her to travel three out of every four weeks. She has an annual travel budget and can travel either by train or by plane. The airline on which she typically ies has a frequent- traveler program that reduces the cost of her tickets according to the number of miles she has own in a given year. When she reaches 25,000 miles, the airline will reduce the price of her tickets by 25 percent for the remainder of the year. When she reaches 50,000 miles, the airline will reduce the price by 50 percent for the remainder of the year. Graph Anne's budget line, with train miles on the vertical axis and plane miles on the horizontal axis. 13. Antonio buys ve new college textbooks during his first year at school at a cost of $80 each. Used books cost only $50 each. When the bookstore announces that there will be a 10 percent increase in the price of new books and a 5 percent increase in the price of used books, Antonio's father offers him $40 extra. a. What happens to Antonio's budget line? Illustrate the change with new books on the vertical axis. b. Is Antonio worse or better off after the price change? Explain. 15. Ben allocates his lunch budget between two goods, pizza and burritos. a. Illustrate Ben's optimal bundle on a graph with pizza on the horizontal axis. b. Suppose now that pizza is taxed, causing the price to increase by 20 percent. Iustrate Ben's new optimal bundle. c. Suppose instead that pizza is rationed at a quantity less than Ben's desired quantity. Illustrate Ben's new optimal bundle. 17. |Connie has a monthly income of $200 that she allocates among two goods: meat and potatoes. a. Suppose meat costs $4 per pound and potatoes $2 per pound. Draw her budget constraint. b. Suppose also that her utility function is given by the equation U |(M, P} = 2M + P. What combination of meat and potatoes should she buy to maximize her utility? (Hint: Meat and potatoes are perfect substitutes.) c. Connie's supermarket has a special promotion. If she buys 20 pounds of potatoes I(at $2 per pound), she gets the next 10 pounds for free. This oer applies only to the first 20 pounds she buys. All potatoes in excess of the first 20 pounds (excluding bonus potatoes) are still $2 per pound. Draw her budget constraint. (1. An outbreak of potato rot raises the price of potatoes to $4 per pound. The supermarket ends its promotion. What does her budget constraint look like now? What combination of meat and potatoes maximizes her utility? 19. Julio receives utility from consuming food (F) and clothing (C) as given by the utility function U (C, F) 2 FC. In addition, the price of food is $2 per unit, the price of clothing is $10 per unit, and Julio's weekly income is $50. a. What is J ulio's marginal rate of substitution of food for clothing when utility is maximized? Explain. b. Suppose instead that Julio is consuming a bundle with more food and less clothing than his utility maximizing bundle. Would his marginal rate of substitution of food for clothing be greater than or less than your answer in part a? Explain
