Question
The table below shows the total benefit, in dollars, that Polina derives from consuming two goods, sandwiches and Good E. Quantity of Sandwiches Total Benefit
The table below shows the total benefit, in dollars, that Polina derives from consuming two goods, sandwiches and Good E. Quantity of Sandwiches Total Benefit of Sandwiches Quantity of Good E Total Benefit of Good E $0 0. so $120 1 $120 $210 2. $180 3 $270 3 $210 $300 4 $222 $310 5 $225 $315 $225 Polina has a limited weekly income of $24, and she spends it all on sandwiches and Good E. Assume the price of each sandwich is $3 and the price of Good E is $6 per unit. (a) Calculate Polina's consumer surplus from the third unit of Good E. Show your work. (b) Identify the quantity of Good E and the quantity of sandwiches that will maximize Polina's total benefit given her weekly income. Explain using marginal analysis. (c) If Polina's weekly income increases from $24 to $28, will Polina be able to buy 4 sandwiches and 3 units of Good E? Explain using numbers. (d) Suppose the price of Good E increases by 8% and Polina buys 2% less of Good E and 4% more of Good Y. Based on this change, identify whether Good E and Good Y are substitutes, complements, related. Explain using numbers. (e) Suppose instead that sandwiches are produced in a perfectly competitive market and the price of bread, an input to the production of sandwiches, decreases. If sandwiches are a normal good, w quantity of sandwiches that will maximize Polina's total benefit increase, decrease, or stay the same? Explain.
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