Asked by Ambrocia Ramirez on Jul 03, 2024
Verified
Assume that a consumer faces the following budget constraints.
a.Assuming that income is the same on both occasions, describe the difference in relative prices between Panel A and Panel B.
b.If income in Panel B is $126, what is the price of good X?
c.If income in Panel A is $84, what is the price of good Y?
d.Assuming that the price of good X is the same on both occasions, describe the difference in income and price of good Y between Panel A and Panel B.
Budget Constraints
The limitations on the consumption bundles that a consumer can afford, given their income and the prices of goods and services.
Relative Prices
The price of one good or service compared to another, usually expressed as a ratio.
Price of Good
The amount of money required to purchase a specific product or service.
- Determine the ideal combination of goods to be purchased based on a consumer's budget and the cost of items.
- Determine the circumstances in which products are considered substitutes or complements according to consumer choices.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
a.
The price of good Y is relatively higher in Panel A than Panel B. Said another way, the price of X is relatively lower in Panel A than Panel B.
b.
$9
c.
$12
d.
Income in Panel A is twice the income in Panel B, and the price of "Y" in Panel B is 1/18 the price of "Y" in Panel A.
The price of good Y is relatively higher in Panel A than Panel B. Said another way, the price of X is relatively lower in Panel A than Panel B.
b.
$9
c.
$12
d.
Income in Panel A is twice the income in Panel B, and the price of "Y" in Panel B is 1/18 the price of "Y" in Panel A.
Learning Objectives
- Determine the ideal combination of goods to be purchased based on a consumer's budget and the cost of items.
- Determine the circumstances in which products are considered substitutes or complements according to consumer choices.