The affordable set of goods and services for the consumer is bounded on which side of the budget...
Question:
The affordable set of goods and services for the consumer is bounded on which side of the budget line?
Budget Line:
Budget line is the line that represents all the possible combinations of points that the consumer can buy given their money income and prices. An increase in income would shift the budget line towards the outward and to the right direction. This means that individuals have increased the range of the affordable choices they have.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerThe affordable set of goods and services for the consumer is bounded inside the budget line. The area under the budget line represents all those set...
See full answer below.
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 Lines & the Rate of Transformation in Economics
from
Chapter 3 / Lesson 11
6.8K
In economics, the rate of transformation model can be used to visualize the concept of budget constraints. Learn more about budget constraints, budgets lines, the rate of transformation curve, and how to maximize the utility of the concepts.
Related to this Question
- If a consumer's marginal rate of substitution is greater than the relative price of the goods, the consumer is a. perhaps at his or her best affordable point. b. at his or her best affordable point.
- 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
- 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
- Consider a consumer who consumes only two goods, x and y. His utility over these two goods is given by U (x, y) = x + y. The budget constraint of the consumer is given by 3x + 6y = 300, where 3 is the price of good x, 6 is the price of good y, and 300 is
- In allocating their limited incomes over a large set of goods and services, consumers should purchase those goods and services that _____.
- 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's budget set for two goods (X and Y) is 400 \geq 4X + 5Y. a. The budget set is illustrated below. What are the values of A and B? A = _________ B = _________ b. Does the budget set cha
- A consumer's best affordable point occurs A) outside the budget line. B) on the budget line. C) at a corner on the budget line, with only one good consumed. D) at a point that cannot be determined. E) inside the budget line.
- Suppose a consumer has a utility function for two goods, X and Y, given by U(X, Y) = 2X + 3Y. The consumer has $30 to spend and the prices of good X and good Y are P_X = $2 and P_Y = $5, respectively. Draw the consumer's budget constraint and indicate the
- A consumer has a utility function U(X, Y) = X^{1/4}Y^{3/4}. The consumer has $24 to spend and the prices of the goods are P_X = $2 and P_Y = $3. Note that MU_X = (1/4)X^{-3/4}Y^{3/4} and MU_Y = (3/4)X^{1/4}Y^{-1/4}. Draw the consumer's budget constraint a
- Suppose that the price of good x is $30 and the price of good y is $30 and a hypothetical consumer has $600 to spend per period on goods x and y. Sketch the consumer's budget constraints. Be sure to i
- The budget line shows the boundary between those combinations of goods and services that: A) have positive marginal utility and those that have negative marginal utility. B) are available and those that are unavailable. C) are desirable and those that
- Suppose a consumer has an income of $30 that is spent on two goods: X and Y. The price of good X is $1.00 and the price of good Y is $3.00. Which of the following bundles of X and Y lie on the individual's budget constraint? a. 8X and 6Y. b. 6X and 8Y. c.
- Suppose a consumer has an income of $30 that is spent on two goods: X and Y. The price of good X is $3.00 and the price of good Y is $1.00. Which of the following bundles of X and Y lie on the individual's budget constraint? a. 8X and 6Y b. 6X and 8Y c. 8
- Suppose an individual consumers two goods, with utility function U (x1, x2) = x1 + 6{\sqrt{x1x2 +9x2 Formulate the consumers utility maximization problem when she faces a budget line p1x1 + p2x2
- A consumer spends all of his money only on goods C and G (prices PC = $1.00 and PG = $3.00), and has $36 of income. He buys 9 units of C. (a). Graph below his budget line with C on the X axis, derivi
- A consumer consumes only two goods X and Y. Marginal utilities of X and Y are 5 and 4, respectively. The prices of X and Y are Rs. 4 per unit and Rs. 5 per unit respectively. Is the consumer in equilibrium?
- 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
- 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's utility function is U(x; y) = (x + 2)(y + 1). The prices are p_x = $8; p_y = $2. The consumer consumes both goods. If his consumptions of good x is 14 units, what is his consumption of good y? Why?
- 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
- 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) = 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
- A consumer with an income of $240 is spending it all on 12 units of good X and 18 units of good Y. The price of X is $5 and the price of Y is $10. The marginal utility of the last X is 20 and the marginal utility of the last Y is $30. What should the cons
- Increases in the price level will: (a) Lower consumption because goods and services are less affordable, (b) Raise consumption because some goods and services are more affordable, (c) Raise consumption because real wealth increases, (d) Lower consumption
- 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
- All of the possible combinations of two goods that lie on one indifference curve: a. Yield the same level of utility. b. Give the consumer the highest possible utility. c. Are affordable. d. Yield
- Let income be I = $100, P(x) = $1, P(y) = $1 and utility U(x, y) = xy with MU(x) = y and MU(y) = x 1.Write the budget constraint and find the optimal consumption bundle for the consumer 2.Suppose that
- Given the prices of good X and Y, the (negative of the) slope of the budget constraint (i.e., -PX/PY) measures: a) the amount of good Y the consumer is willing to forgo in order to consume one more unit of good X. b) the ratio of the consumer's income to
- The consumer price index is the: A) average of the prices of the goods and services purchased by a typical urban family of four. B) average of the prices of new final goods and services produced in the economy over a period of time. C) cost of a market ba
- Suppose that there are two goods (X and Y). The price of X is $2 per unit, and the price of Y is $1 per unit. There are two consumers ( A and B). The utility functions for the consumers are: for consumer A: U (X,Y)= X^.5Y^.5 and for consumer B: U(X,Y)=X^.
- In the consumer choice problem, consumers are confronted with which of the following? a. A finite budget that constrains the quantity of goods and services that consumers can buy. b. A set of prices for those goods and services. c. A set of different con
- 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.
- Assume that there are two goods (X and Y). The price of X is $2 per unit, and the price of Y is $1 per unit. There are two consumers ( A and B). The utility functions for the consumers are: for consumer A: U (X,Y)= X^.5Y^.5 and for consumer B: U(X,Y)=X^.8
- Given the prices of good X and Y, the (negative of the) slope of the budget constraint (i.e., - PX/PY) measures a. the amount of good Y the consumer is willing to forgo in order to consume one more un
- 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
- 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 with income y= $120 obtains utility from two goods X & Y with prices PX =$20 and Py= $10. The consumers budget constraint is written is 20x + 10 y= 120 (or as a first degree polynomial y =
- If a consumer's budget constraint has a slope that is less than -1: a) the consumer gets more utility from good X than from good Y. b) the price of good X is less than the price of good Y. c) the consumer gets less utility from good X than from good Y. d)
- A conventionally shaped indifference curve: a. shows that as a consumer has more of a good, he or she is less willing to exchange it for one unit of another good. b. shows all combinations of goods that give a consumer the same level of utility.
- 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
- A consumer has a fixed amount of income to spend, and buys only goods A and B. The price of A is $10 and the price of B is $2. She is currently spending all of her income per week and is buying some amount of A and some amount of B, such that the marginal
- 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) Illustrate the consumer's
- Consider a consumer who consumes two goods and has utility function u(x_1, x_2) = x_2 + \sqrt{x_1}. The price of good 2 is 1, the price of good 1 is p, and income is m. Show that a) both goods are n
- 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
- Rational consumers will continue to consume two goods until a. the marginal utility per dollar's worth of the two goods is same. b. the marginal utility is the same for each good. c. the prices of the two goods are equal. d. the prices of the two good
- Maximize the utility of two good x and y given by the utility function U(x, y) = xy subject to the budget constraint where the price of x is $3, the price of y is $6 and the individual has an income b
- The marginal propensity to consume measures: a. the slope of the consumption line b. the fraction of any additional dollar of disposable income that will be spent on goods and services d. all of the a
- Suppose goods 1 and 2 are perfect complements. All consumers have utility function U(q1,q2) = min{q1,q2}. The sum of consumers' income is 100. Supply of the two goods is given by: S1(p1) = 2p1 and S2(
- The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as: a. economizing behavior b. maximizing behavior c. the price constraint d. the budget constraint
- In allocating their limited incomes over a large set of goods and services, consumers should purchase those goods and services that: a. provide the most utility. b. fit their tastes and preferences. c. provide the most utility per dollar spent. d. are rea
- For a consumer to maximize utility from a given income,: a) the marginal utility from each good must be maximized. b) the total utility from each good must be maximized. c) the marginal utilities of all goods and services consumed must be equal. d) the ma
- Assume that the price of Good X is $5, the price of Good Y is $4, and the consumer's budget is $100 per month. a. Carefully construct and fully label the consumer's budget line. What is its slope? b
- Total utility is maximized in the consumption of two goods by equating the a. prices of both goods for the last dollar spent on each good. b. marginal utilities of both goods for the last dollar spent on each good. c. ratios of marginal utility to the
- 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 CPI measures: a) the average cost of the goods and services purchased by consumers. b) the prices of all goods purchased by individuals and non-profit institutions. c) the average cost of goods and services purchased by individuals and firms. d) the a
- Given that the utility function for an individual is: and Income 72, the price of good one 4, and the price of good two 4, and the new price of good one = 77, What is the change in consumer surplus fo
- Consider a rational utility maximizing consumer who is choosing between two goods clothing (C) and food (F), where the total utilities of the two goods are independent so that total utility (U) = Util
- ''When a consumer maximizes his utility subject to a budget constraint, he always chooses a bundle where he equates his marginal rate of substitution between each pair of goods to the ratio of their two prices.'' Is this correct? Explain.
- Total utility is maximized in the consumption of two goods by equating the: a. prices of both goods for the last dollar spent on each good. b. marginal utilities of both goods for the last dollar spent on each good. c. ratios of marginal utility to the pr
- If a consumer has a utility function of u(x_1,x_2)= x_1x_2^4 where MU_1 = x_2^4 and MU_2 = 4x_1x_2^3 , what fraction of her income will she spend on good 2? Assume that the person faces a downwar
- 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
- Any combination of goods lying outside of the budget line: (a) implies that the consumer is not spending all of his income. (b) yields less utility than any point on the budget line. (c) yields less utility than any point inside the budget line. (d) is un
- 11. A consumer has $400 in income, the price of food is $1 and the price of Y is $1. Also, the consumer has $100 in SNAP benefits that can only be used for food. BCno S is her budget constraint with n
- Consider a consumer with income of $220 and utility function U(x,y) =min{3x,5y). The prices of goods x and y are $5 and $10, respectively. Let x* and y* denote the utility-maximizing levels of consump
- If money income doubles and the prices of all goods triple, then the: a. budget line remains unchanged. b. consumer is worse off due to inflation. c. consumer will buy more normal goods. d. budget line will shift out.
- Give examples of consumer durable and consumer non-durable goods and services.
- The slope of the budget constraint is determined by the: a. relative price of the goods measured on the axis, b. relative price of the goods measured on the axis and the consumer's income, c. preferences of the consumer, d. Both b) and c) are correct.
- Give examples of goods with high utility and high prices, and goods with low utility and low prices.
- A cost imposed on people other than the consumers of a good or service is a: a. price floor b. positive externality c. price ceiling d. negative externality
- You are choosing between two goods, X and Y, and your marginal utility from each is as shown below. a. If your income is $9.00 and the prices of X and Y are $2.00 and $1.00 respectively, what quantiti
- Consumers should allocate their scarce income so that: A) the marginal utility for all goods consumed is zero. B) the marginal utility for all goods consumed is equal. C) the marginal utility divided by price is equal for all goods consumed. D) the ma
- A utility function is U(x, y) = min {x, y2}. 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?
- Given a consumer has a utility function of: U(X,Y) = 5XY^2 And the following budget constraint: 2X + 8Y = 240 A) Find the best feasible bundle. B) Suppose your income doubles. What is your new best fe
- Suppose there is an economy with two individuals, A and B, and two goods, X and Y. The individuals' utility functions are: UA = 0.2lnX + 0.8lnY, UB = 0.8lnX + 0.2lnY For simplicity, let the price of
- Consumer Price Index (CPI) measures a. the value of goods and services produced by a country b. the cost of goods and services produced by a typical producer c. the cost of goods and services purchased by a typical consumer d. the value of goods and servi
- Suppose the utility function for an individual is given by u(x, y) = x + y, where x and y are two goods. The budget constraint of an individual is 2x + 5y = 10, where I = 10 is the income of an individual, P_x = 2 - the price of good x, and P_y = 5 - the
- Suppose a consumer spends $100 of income on two goods: buying 4 units of good X (priced at $10) and 3 units of good Y (priced at $20). Both are substitute goods. a. Using indifference curves and budg
- Assume that the unit price of good A is $2, and the unit price of good B is $5. If an individual has income of $30, which of the following consumption bundles of (good A, good B) is on the edge of the budget constraint? A) (5,5) B) (5,4) C) (6,4) D (6
- A cost imposed on people other than the consumers of a good or service is a a. price floor. b. negative externality. c. positive externality. d. price ceiling.
- A consumer spends his limited income on three goods such that the MU_X = 4, MU_Y = 4, MU_Z = 4; and P_X = 4, P_Y = 2, P_Z = 1. Which of the following statements is (are) true? a. Because the marginal utilities of all three goods are equal, the consumer is
- Summarize the step-by-step decision-making process the rational consumer will pursue to reach the utility-maximizing combination of goods and services attainable.
- Give examples of consumer durable goods, consumer non-durable goods and services.
- Utility maximizing consumption of two goods with different prices and income
- Utility function from consuming a bundle of goods (X,Y) is given as and Prices are given as =($2, $4), and income M=$100 1. Derive the optimum consumption bundle. 2. If prices now change to =($4, $4).
- Assume a consumer's utility function is U = (q_1)^0.5+ 2(q_2)^0.5 and her total income is $90. The price of both good 1 and good 2 is $1. (a) What is the bundle that maximizes this consumer's utility
- Any bundle of goods located inside (versus outside) of a consumers budget constraint: i. is unobtainable with the consumers income ii. implies the consumer is not spending all of her income on goods a
- A consumer has $300 to spend on goods X and Y. The market prices of these two goods are P_x = $15 and P_y = $ 5. a. What is the market rate of substitution between goods X and Y?
- A consumer has $600 to spend on goods X and Y. The market prices of these two goods are Px = $30 and Py = $10. 1. What is the market rate of substitution between goods X and Y? 2. Suppose that the c
- The demand for a good is more price elastic A. if closer substitutes are available. B. in the short run than in the long run. C. if the share of the good in the average consumer's budget is smaller
- The MRS of a consumer in a market for goods A and B is 1 for all combinations of the two goods in his indifference map. The price of good A is $8 per unit and the price of good B is $10 per unit. The consumer can spend no more than $160. Determine the bun
- 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
- 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)
- A consumer has utility u.(x, y) = .6 In x + .4 In y where prices are p_x = 2 and p_y = 2. (a) If the consumer has income of $100 per period. how much of each good should be consumed to maximize utili
Explore our homework questions and answers library
Browse
by subject