Problem 04-01 A consumer has $300 to spend on goods X and Y. The market prices of these two goods are Px = $15 and Py = $5. a. What is the market rate of substitution between goods X and Y? b. In the graph below: (1) Illustrate the consumer's opportunity set, and (2) Illustrate the consumer's opportunity set for the case where Income Increases by $300. Instruction: Graph both opportunity sets from where X = 0 to where they cross the X-axis (two points for each curve). Your Graph Score: 0% Opportunity Set 140 120 Original Oppoi Opportunity S 100 dArk eLF 80 60 40 20 10 20 30 40 50 XProblem 04-02 A consumer is In equilibrium at point A In the diagram below. The price of good X Is $5. GoodY 45 40 dArk eLF 35 30 25 20 15 10 5 20 Good X a. What is the price of good Y? b. What is the consumer's Income? S C. At point A, how many units of good X does the consumer purchase?Problem 04-06 (algo) In the below figure, a consumer is Initially in equilibrium at point C. The consumer's Income is $900, and the budget line through point C is given by $900 = $150X + $300 Y. When the consumer is given a $150 gift certificate that is good only at store X, she moves to a new equilibrium at point D. Product Y Product X a. Determine the prices of goods X and Y. Price of X: $[ Price of Y: $ [ b. How many units of product Y could be purchased at point A? C. How many units of product X could be purchased at point E? d. How many units of product X could be purchased at point B? e. How many units of product X could be purchased at point F?A consumer's budget set for two goods (X and Y) Is 800 2 2X + 5 Y. a. The budget set is illustrated below. What are the values of A and B? Good Y Good X A R = b. Does the budget set change if the prices of both goods double and the consumer's income also doubles? O Yes, It rotates clockwise O Yes, It shifts out from the origin No, It does not change O Yes, It shifts In toward the origin c. Given the equation for the budget set, what are the prices of the two goods? Good X: $ Good Y: $ What is the consumer's Income? $Problem 04-10 (algo) A worker views leisure and Income as "goods" and has an opportunity to work at an hourly wage of $13 per hour. a. The worker's opportunity set in a given 24-hour period is illustrated below. What are the values of A and B? Income Leisure A =[ B = b. Suppose the worker is always willing to give up $17 dollars of income for each hour of leisure. Do her preferences exhibit a diminishing marginal rate of substitution? No How many hours per day will she choose to work?Problem 04-13 A recent newspaper circular advertised the following special on tires: "Buy three, get the fourth tire for free-limit one free tire per customer." If a consumer has $360 to spend on tires and other goods and each tire usually sells for $40, plot this consumer's opportunity set when this special is offered. Instruction: If the opportunity set has any kinks, be sure to plot all the points where the kinks occur, in addition to the points where the line crosses the Intercepts. Graph the budget set from where Tires = 0 to where it crosses the X-axis. Opportunity Set Tools 400 380 360 340 Budget Set 300 280 260 24 22 388 Income Spent on Other Goods 20 180 160 2 4 6 8 10 12 TiresProblem 04-14 During the past major recession, upscale hotels In the United States recently cut their prices by 25 percent In an effort to bolster dwindling occupancy rates among business travelers. A survey performed by a major research organization indicated that businesses were becoming wary of bad economic conditions and began resorting to electronic media, such as the Internet and the telephone, to transact business. Assume a company's budget permits It to spend $6,000 per month on either business travel or electronic media to transact business. In the graph below, illustrate this company's budget set if the price of business travel is $1,200 per trip and the price of electronic media is $600 per hour. In the same graph, illustrate this company's budget set after the price of business travel Is reduced by 25 percent. Instruction: Graph both budget sets from where the Quantity of Electronic Media = 0 to where the budget set crosses the X-axis. Budget Sets CO Tools Initial Budget Budget Set af Quantity of Travel 2 4 6 8 10 12 Quantity of Electronic MediaSuppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with workers' compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $20 per hour. Assume that Albert and Sid view income and leisure as "goods," that both experience a diminishing rate of marginal substitution between Income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Albert and Sid's opportunity set is presented below: Albert and Sid's Opportunity Set Income dArk eLF 10 15 20 25 30 Leisure Hours What is the value of A when the wage Is $25? (Assume a 24-hour work day.) What is the value of A when the wage Is $20? (Assume a 24-hour work day.) At the wage of $25 per hour, both Albert and Sid are observed to consume 14 hours of leisure (and equivalently supply 10 hours of labor). After wages were cut to $20, Albert consumes 11 hours of leisure and Sid consumes 16 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $20 per hour: Albert's supply of labor = [ Sid's supply of labor =