Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. economics
  3. 4. suppose we have a market for coffee and pastrie

4. Suppose we have a market for coffee and pastries. a. Graph the market (no need...

60.1K

Verified Solution

Question

Economics

4. Suppose we have a market for coffee and pastries.

a. Graph the market (no need to give numbers for endpoints ofthe budget constraint) and show an optimal consumption bundle.

b. Suppose the price of coffee drops. Graph the new budgetconstraint.

c. Now, illustrate the INCOME and SUBSTITUTE effects of theprice change and show the new optimum. Remember, you must draw theimaginary budget constraint and then find the tangency on the newbudget constraint.

Answer & Explanation Solved by verified expert
3.6 Ratings (574 Votes)
a Suppose we measure coffee along the horizontal axisand pastries along the vertical axis The initial budget line is ABand the initial indifference curve IC1 which is tangent to AB atpoint M with respect to which the initial consumption of coffee isq1 and initial consumption of pastries is X1 Now when the price ofcoffee drops the budget line will rotate outward from AB to ACwhich becomes tangent to the    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

9 If the exact volume of a right circular cylinder is 200 cm and its...

Geometry
Q

23 f x 22 x 4 3 24 3 2 x x x 6 Domain...

Basic Math
Q

For the function f(x)=x+2x-24 solve the following.f(x) ? 0Select the correct choice below and fill...

Basic Math
Q

Samples can help in estimating a population mean. Which of thefollowing sample sizes would have...

Basic Math
Q

The graph of g is given below A Notice this is the graph of the...

Calculus
Q

The graph below is the function f x 5 4 3 2 1 21 2...

Calculus
Q

The corresponding system has no solution, {}.The corresponding system has one solution.The solution set isThe...

Algebra
Q

On July 1, 2019, the first day of its 2020 fiscal year, the Town of...

Accounting
Q

Current Attempt in Progress Presented below are the financial statements of Blossom Company. (a)...

Accounting
Q

Maben Company was started on January 1, Year 1, and experienced the following events during...

Accounting
Q

The following data is given: December 31,...

Accounting
Q

Question 3 Your answer is partially correct. Try again. Midlands Inc. had a bad year...

Accounting