A person's budget set for 2 goods (X and Y) is 700 greater than or equal to 5X + 2Y. How does...
Question:
A person's budget set for 2 goods (X and Y) is {eq}700 \geq 5X + 2Y {/eq}.
How does the budget set to change if prices for both double goods double and consumer income also doubles?
Budget Set:
The budget set defines all those bundles of goods that consumer can buy at the given income and prices of the goods. Those bundles which fall below the budget line can be purchased using less than the entire income of the consumer. Those bundles which fall on the budget line can be purchased using the entire income of the consumer.
Answer and Explanation: 1
The budget constraint of the consumer is: {eq}5X + 2Y \le 700 {/eq}
When the income and prices of the goods double, the budget constraint becomes:
{eq}\begin{align*} 10X + 4Y &\le 1400\\ \Rightarrow 5X + 2Y &\le 700 \end{align*} {/eq}
The budget set of the consumer won't change as the budget constraint hasn't changed.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Budget Constraints: Definition & Formula
from
Chapter 1 / Lesson 6
62K
Learn what budget constraint is and view examples. Understand how to use the budget constraint formula and how to represent a budget constraint using a graph.
Related to this Question
- A person's budget set for 2 goods (X and Y) is 700 greater than or equal to 5X + 2Y. What are the values of A and B (in a budget set table)?
- Assume that a consumer can buy only two goods X and Y, and has an income of $120. The price of X is $10 and the price of Y is $20. If the consumer spends all of her money on X and Y, which of the following would be a possible combination: A. 4X and 2Y B
- A person has $120 to spend on two goods (x,y), whose respective prices are $4 and $5. A) Draw a budget line showing all the different combinations of the two goods that can be bought with the given budget. B) What happens to the original budget line if th
- A consumer consumes good x and good y. She initially has an income of I = $1,000 and faces prices of px = $10 and py = $20. Then, the price of good x doubles. In response to the rising prices, the government gives the consumer a lump-sum payment of $300.
- A consumer's budget set for two goods (X and Y) is 500 \geq 5x + 10Y. a. The budget set is illustrated below. What are the values of A and B? A = B = b. Does the budget set change if the prices o
- A consumer's budget set for two goods (X and Y) is 1,000 - 2X + 4Y. 1. The budget set is illustrated below. What are the values of A and B? A = B = 2. Does the budget set change if the prices of bo
- The price of good X is $50. a) What is the consumer's income on budget line B_1? b) What is the price of good Y on Budget line B_1? c) What is the equation of the budget line B1, given the prices and income that you have determined? d) What is the con
- Assume that a consumer purchases a combination of product A and product B such that the MUa/Pa=8 and MUb/Pb=6. To maximize utility without spending more money, the consumer should:
- Suppose that Matthew can buy video games and/or DVDs, subject to his budget constraint. If the prices of both goods double, and Matthew's income doubles, what will happen to Matthew's budget line rega
- Assume that a person's utility over two goods is given by U(x1, x2) = (x1 - 5)^{1/3}(x2 - 10)^{2/3} The price of good x1 is equal to p1 and the price of good x2 is p2. The total income of the individual is given by I. (a) Write down the budget constrai
- Originally the consumer faces the budget line p1x1 + p2x2 = m. Then the price of good 1 triples and the price of good 2 becomes 5 times larger. 1. Write down an equation for the new budget line in t
- A person has $120 to spend on two goods (x and y) whose respective prices are $3 and $5 per unit. (a) Draw the budget line showing all the different combinations of the two goods that can be bought w
- Suppose a consumer has an income equal to I which he/she spends on either food or clothing. The price of food is given by Pf and the price of clothing is given by Pc. If the consumer spends all of his/her income on clothing, the expression for the number
- A consumption bundle that lies inside the individual's budget line is a consumption bundle that: A) does not maximize the individual's utility given their tastes, income, and the price of the goods. B) does not exhaust the individual's income. C) the indi
- The consumer must decide how to split $20 between spending and saving. Refer to Figure 7.5. If the consumer is subject to present bias, he will consume now and save to maximize utility.
- An individual who spends his income on two goods only, spends initially, exactly the same amount on each good. The price of x has risen by 20% while the price of y fell by 20%. The agent will be neither better nor worse off as a result of the changes. Tru
- An individual who spends his income on two goods only, spends initially, exactly the same amount on each good. The price of x has risen by 20% while the price of y fell by 20%. The agent will be neither better nor worse off as a result of the changes. Is
- Suppose a consumer has an income equal to I which he/she spends on either food or clothing. The price of food is given by P_f and the price of clothing is given by P_c. If the consumer spends all of his/her income on clothing, the expression for the numbe
- Consider a consumer with $10 to spend on these two goods where the price of apples is always $2 each. a) Find the utility maximizing combination of apples and oranges if oranges cost $4 each. Explain why the consumer didn't choose the bundle of 3 apples a
- Show two consumers, purchasing a basket of goods, each that maximizes their happiness, subject to their budget line. Make sure they face the same prices, but otherwise, their incomes and preferences can be different. Do not violate any properties of ICs.
- The budget line is the boundary between a. goods and bads. b. preferred and nonpreferred consumption combinations. c. income and expenditure. d. affordable and unaffordable consumption combinations. e
- Assume that the land(lot size) is measured on the horizontal axis and consumption goods(x) on the vertical axis. If the price of consumption goods x increases relative to that of the land, the budget line will: (a) become flatter. (b) become steeper. (
- A person has a utility functions with MRSxy = change in Y/ change in X. The price of good X is $10 and the price of good Y is $20. The person has a budget of $1,000 for purchase of X and Y. a. What is the equation of the person's budget line? b. If this
- The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as: a). P x X + P y Y = B . b). P x X + P y Y = 1 B . c). P x X = B + P y Y . d). P x X P y Y = 1 B .
- Given an individual's current consumption patterns, we know that the person is consuming in such a manner that he is maximizing his satisfaction. Given a decrease in the price of one of the goods he normally purchases, what will happen to the consumer's t
- Katie's utility function is U(x_{1}, x_{2}) = 2(lnx_{1})+ x_{2}. Given her current income and the current relative prices, she consumes 10 units of x_{1} and 15 units of x_{2}. If her income doubles,
- If the consumer's budget constraint is given by 10F + 5S = 100 where F is the quantity of food and S is the quantity of shelter, how much food can he buy with his income remaining if he purchases 2 units of shelter? A. 10 B. 5 C. 20 D. 9 E. None of the ab
- The consumer price index: a. tracks the value of output over time. b. is not tied to cost-of-living adjustments. c. doubles every five years in the economy. d. is a weighted average of consumer prices. e. is a broader price index measure than the implicit
- The consumer is choosing between two goods- good1 and good2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. Let the utility function of the consumer be U (X1, X2) = X1(1/4)X2(3/4). a) Calc
- A consumer spends all her income on goods x and y. Her income is 400. Prices of x and y are px = 6 and py = 2. The preferences of the consumer are represented by U(x, y) = x3y, where x and y denote th
- In moving along a given budget line: a) the prices of both products and money income are assumed to be constant. b) each point on the line will be equally satisfactory to consumers. c) money income varies, but the prices of the two goods are constant. d)
- Assume that a consumer can buy only two goods X and Y, and has an income of $120. The price of X is $10, and the price of Y is $20. If the consumer spends all of her money on X and Y, which of the fol
- The Consumer Price Index is not used: a) to determine the purchasing power of people's nominal incomes. b) to measure changes in the cost of living. c) to measure the average price level of all final goods and services produced. d) to compute the U.S. inf
- According to the figure below, if the price of X is $5, what combination of X and Y will a utility-maximizing consumer choose? a. 80X, 20Y, b. 120X, 620Y, c. 120 X, 250Y, d. 200 X, 620Y, e. None of the above.
- The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as:
- A line representing all the possible combinations of two commodities that a consumer can purchase at a particular time, given the market prices of the commodities and the consumer's income, is a(n): a. budget line. b. consumption line. c. income consum
- A consumers utility is defined by the function, U(x1,x2) = x1^1/2 x2^1/2 Assume the prices of x1 and x2 are respectively defined by $5 and $10, and the consumer has 20 dollars in income. a. Find the c
- If, for a consumer choosing between two goods, the MRS equals the price ratio, then _____.
- The consumer is choosing between two goods- good1 and good2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. Let the utility function of the consumer be U (X1, X2) = 2X1+3X2. a) Calculate t
- The consumer is choosing between two goods- good1 and good2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. Let the utility function of the consumer be U (X1, X2) = X1+X2. a) Calculate the
- The consumer is choosing between two goods- good1 and good2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. Let the utility function of the consumer be U (X1, X2) = 2X1 + X22. a) Calculate
- The consumer is choosing between two goods- good1 and good2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. Let the utility function of the consumer be U (X1, X2) = X1*X2 a) Calculate the
- a) If the person wants to spend an equal amount of money on both pizza and Pepsi what combination of quantity of both goods needs to be purchased to satisfy the budget constraint? Write the budget equation in this case? b) What happens to the budget equ
- A consumers budget constraint identifies the different bundles of goods and services that can be purchased, given income and prices. A bundle of goods that is located inside the budget constraint: i.
- Suppose Marjorie currently values a pair of shoes at $50, and the price of a pair of shoes is $40. What is Marjorie's best course of action? a) Stop consuming shoes, since she is saving money, b) Increase her consumption of shoes until her income is spent
- Graphing the BC. Suppose that an individual has a weekly income of $180 to spend on goods X and Y, which have prices of $2 and $6, respectively. Graph the budget constraint. Suppose that the price of
- Suppose a consumer has a daily income of $48 and purchases just two goods, A and B. The price of A is $8 and the price of B is $6. a. Draw the budget line for the consumer in a graph. Indicate the area of the graph that is attainable given the income and
- Assume that a consumer can purchase only two goods: R (recreation) and M (material goods). The market price of R is $2 and the market price of M is $1. The consumer spends all her income in such a way
- Assuming an individual has a total income of $2000 and the current price of good x is $10 and the price of good y is $40, graphically show the possible combinations of the two goods the consumer could
- Consider a consumer allocating a budget of $ 100 between two goods, X and Y. The price of X is $ 10 per unit and the price of Y is $ 5 per unit. (a) In a diagram show how the consumer's budget constr
- A consumer's utility is defined by the function: u(x_1,x_2) = x_1^(1/3), x_2^(1/2). Assume prices of x_1 and x_2 are respectively defined by P_1 and P_2 and the consumer has W dollars in income. 1: F
- 1. If the price of x triples and the price of y doubles, then the budget line becomes steeper. True or False? 2. The price of bread is $7.5 per kilogram, and the price of butter is $5 per kilogram. Rupert buys 12 kilograms of bread, and his income is $120
- A consumer with 200 dollars is deciding how many bags of chips and cans of coke to buy. Each can of coke is 2 dollars, and each bag of chips is 2.50. There is a quantity discount, and if the consumer
- Suppose there are two goods, labeled x, y. A consumer has a budget of w = 220. Suppose the following two consumption bundles: (x = 4, y = 10), (x = 6, y = 4) all cost the consumer 220. (a) What's the
- For price discrimination, would taking the average of the price for each tier be the same as splitting the consumer surplus into seperate tiers?
- Suppose a consumer's utility function is given by U(X,Y) = X*Y. Also the consumer has $288 to spend, and the price of X, Px=16, and the price of Y, Py=1. How much X and Y should the consumer purchase
- Consider the following choices made by a rational consumer who spends her entire budget on purchasing two goods X and Y. When prices and income are (p_x, p_y, M) = (4, 2, 100) the consumer buys bund
- i. A consumer has income of $3,000. Wine costs $3 per glass, and cheese costs $6 per pound. Draw the consumer's budget constraint with wine on the vertical axis. What is the slope of this budget constraint? ii. Show a consumer's budget constraint and ind
- Suppose that the price of good X is $ 10, the price of good Y is $ 20, and our income is $100. Now suppose that the prices stay the same, but your income increases to $200. a. Write down your new budg
- Suppose a consumer has a utility function given by U = 4X +12Y. The price of X is $2 and the price of Y is $1. The consumer has $24 (his income) to spend on the two goods. Plot good X on the X-axis and good Y on the Y-axis.
- A consumer would gain more utility from purchasing a video game than from purchasing a TV, even though both products have the same price of $400. Assuming the consumer is rational, which will they choose to purchase? Why?
- Suppose the wages of the cafeteria workers on campus increase by 10%, forcing the price of meals to increase at the same time your scholarship income doubles. (Cafeteria meals are an inferior good.) How will these changes impact the quantity and price lev
- Suppose the price of A is $20 per unit, the price of B is $10 per unit, the consumer's income is $1000 per month, and the consumer's budget line is BL1. Then the price of A goes down, price of B remains the same, the income goes up, and the new budget lin
- Suppose a consumer buys two goods, x and y , and has income of $30. Initially P_x = 3 and P_y = 3 and the consumer chooses basket A with x =5 and y= 5. The prices change to P_x = 4 and P_y = 2 and the consumer chooses basket B with x = 1 and y = 13. a. Th
- A consumer's budget is M=300, which she spends on buying two goods, X and Y. Her utility from consuming x units of good X and y units of good Y is given by the following Cobb-Douglas utility function
- Suppose a consumer has $200 in income and purchases 2 items: shirts and pants. Suppose the price of a shirt is $10 per shirt and the price of a pair of pants is $20 per pair of pants. Suppose you hav
- The equation for a budget line for goods X and Y, with P_x being the price of X, P_y being the price of Y, and B being the budget, can be written as: a. P_x X + P_yY = B. b. P_x X + P_y Y = 1/B. c. P_x X = B + P_y Y. d. {P_x X} / {P_y Y} = 1 - B.
- The consumer is choosing between two goods- good1 and good2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. Let the utility function of the consumer be U (X1, X2) = Min (X1,X2) a) Calculat
- When the price of good X falls, more of that good will be consumed. To find the highest satisfaction from a combination of goods, the consumer will: A. find any combination of goods that falls on the budget line. B. find a combination that falls on the ne
- The effect of a change in the price of a good or service on the quantities consumed when the consumer remains in different between the original and new combination of goods consumed is the: Select correct option: a. Substitution effect. b. Real income eff
- Autonomous consumption is: A. the part of consumption that rises or falls with changes in disposable income. B. the minimum that people will spend even if disposable income is zero. C. the amount people will spend when the C line crosses the 45-degree lin
- Suppose that a consumer faces the choice of how many left shoes to buy and how many right shoes to buy. The price of each type of shoe is $20 and the consumer has $200 to spend on shoes. Given that le
- Suppose you have drawn a consumer's budget line for food and clothing with food on the horizontal axis and clothing on the vertical axis. If the price of food increases: A. the budget line becomes flatter. B. the budget line becomes steeper. C. the budget
- Penny is a consumer with a tight budget. The share of her budget spent on goods and services is significant in determining how well she is able to respond to price changes. Based on the criteria, for
- A budget line graphically illustrates: a) The possible prices of goods, b) The amount of one good that can be purchased with a given income, given the price of that good, c) The possible combinations of two goods that can be purchased with a given income,
- The consumer is choosing between two goods: good 1 and good 2. Good 1 is priced at $2 and good 2 is priced at $3. The consumer has a total of $600 to spend on both the goods. 1. Let the utility function of the consumer be U (X1, X2) = X1(1/2)X2(1/2). a)
- A consumer spends his income between hot dogs and cornbread. The intercept of the budget line on the hot dogs axis is 419, the intercept of the budget line on the cornbread axis is 722 and the price c
- Suppose that an individual consumes transportation (T) and all other goods (G). Assume that the price of G is pg, the price of transportation is pt, and Y is income. (a) If this consumer spends all of her income on transportation, how much could she buy?
- A consumer has an income of $3,000. Wine costs $3 per glass, and cheese costs $6 per pound. Draw the consumer's budget constraint with wine on the vertical axis. What is the slope of this budget constraint?
- A consumer has income of $3,000. Wine costs $3 per glass, and cheese costs $6 per pound. Draw the consumer's budget constraint with wine on the vertical axis. What is the slope of this budget constraint?
- If bread is produced by using a constant returns to scale production function, then if the: a. number of workers is doubled, twice as much bread will be produced. b. amount of equipment is doubled, twice as much bread will be produced. c. amounts of equip
- Ahn's utility function for goods X (pizzas) and Y (Cola) is represented as U(X,Y)=2\ln(X)+\ln(Y). The process of X and Y are $1 and $1, respectively. Ahn's income is $12. Calculate Ahn's optimal consumption bundle (X',Y') after the price change.
- Which of the following is true about the consumer price index? A) It assumes that consumers purchase the same amount of each product in the market basket each month. B) It accounts for people switching to goods whose prices have fallen. C) It frequently u
- If an individual is prepared to pay $4 for the first unit of a commodity, $3 for the second, $2 for the third, and the market price is $2, then: A) Consumer surplus is $2 B) The individual will purchase two units of the commodity. C) Consumer surplus i
- Suppose an individual has a preference represented by the utility function U(X_{1},X_{2} = X_{1} + lnX_{2}. The individual consumes two goods,X_{1} and X_{2} and faces the prices P_{1} and P_{2}. Con
- Emma has a budget of 100 dollars and can choose a consumption bundle between two goods; X1 and X2. The price of good 1 is 5 and the price of good 2 is 1. A) Graph Emma's budget constraint and denote
- Let money income be $10 while the price of good 1 is $2 and the price of 2 is $1. Draw a budget line. Now draw the new budget lines according to each of the following changes in prices and income. (i)
- A consumer consumes one consumption good x and hours of leisure h. The price of the consumption good is p, and the consumer can work at a wage rate of s=1. What is the consumer's Walrasian budget set?
- A consumer has budgeted a total of $225 to spend on two goods, X and Y. She likes to consume a unit of good X in combination with good Y. Any unit of X she cannot consume with Y is useless. Similarly, any unit of good Y she cannot consume with good X is u
- A consumer's preferences can be represented by the utility function U(X,Y) = Min (2X,Y). The consumer has $300 to spend and the price of Good X is PX = $2 and the price of Good Y is PY = $5. If the consumer maximizes their utility subject to their budget
- Health expenditure was $5,711 per person in 2003. The Consumer Price Index was 201.6 in 2006 and 177.1 in 2003. Adjusted for inflation, how much was 2003 spending?
- A consumer has preferences for two goods, 1 and 2, which can be represented with the utility function u(x_1, x_2) = 4x_1 + 3x_2. A. If a consumer has a budget of 20 AZN while prices of goods 1 and 2 are 2 AZN and 4 AZN, respectively, calculate the bundle
- The following graph shows a portion of a consumer's indifference map. The consumer faces the budget line LZ, and the price of X is $15? a. The consumer's income = $ b. The price of Y is s c. The e
- All there is are movies (m) and food (f). The price of movies is $10 while the price of food is $5. I have $145 to spend on these two goods. My preferences are described by the following utility function: u(m, f) = m + f + mf. In order to raise revenues,
- 1. A consumer has monthly income of $100. His utility function is given as U(x_1, x_2) = x_1 x_2. The market prices of two commodities are p_1 = $5, p_2 = $10. Draw his budget line and indifference c
- Dissaving occurs when: a. consumption is equal to disposable income. b. disposable income is greater than consumption. c. consumption is greater than disposable income. d. consumption is greater than personal income. e. consumption is less than perso
- Assume a consumer has a budget of $12, water costs $2 per bottle, and chips cost $3 per bag. Given the information below, which combination of these goods will maximize utility? Bottled Water: ||Quantity||Total Utility |0|0 |1|40 |2|70 |3|90 |4|100 |5
- Consider a consumer who allocates her income m to the consumption of goods 1 and 2. Denote by pi the price of good i = 1, 2. The consumer's preferences are such that there exists a bundle x = (x1, x2)
- A utility function is U(x,y) = min(x,y^2). If the price of x is $25, the price of y is $10, and consumer chooses 5 units of y. How much is the consumer's income?
- The consumer's budget line: a. indicates the options from which the consumer can choose. b. identifies the optimal basket for the consumer. c. identifies the tastes of the consumer. d. ranks the baskets of goods in the order the consumer prefers them. e.
Explore our homework questions and answers library
Browse
by subject