Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Please show me with drawn out graphs how to do the graphs step by step. 1) Severe weather and lower rain levels have had significant

Please show me with drawn out graphs how to do the graphs step by step. image text in transcribed

1) Severe weather and lower rain levels have had significant impacts on parts of the US in recent years. 1 In this question, we'll focus specifically on the market for almonds, many of which are grown in California. You can assume that almonds are good X, the composite good is good Y,PX is the price of goodX,PY is the composite good price index, and I is income. a. What is the consumer's objective when choosing the optimal point? b. Set up a graph of the optimal point, making sure to label X and Y. c. The primary effect of the weather on the almond market has been to reduce crops, leading to increased prices. 1) How will this affect the budget constraint? 2) Show the change in the budget constraint and the change in the optimal point. 3) Is this consumer better off? How do you know? 4) According to your graph, what happened to almond consumption? d. Suppose that producers realize that they must raise prices but they still want to keep a basic number of consumers. In order to do this, they raise prices only on consumption levels above 25. Furthermore, this price increase is larger than that in part c, in order to make up for the lost revenue by keeping price the same on units below 25 . 1) On a new graph, show the original budget constraint, the budget constraint from part c, and this new budget constraint. 2) Show an individual who prefers this new pricing structure to the one in part c. How can you tell that they prefer this one

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions