9. a. Which market basket is the equilibrium basket? b. Which market basket(s) i
ID: 2439682 • Letter: 9
Question
9. a. Which market basket is the equilibrium basket? b. Which market basket(s) is (are) unattainable? c. The consumer is indifferent between market basket D and market basket d. Which market basket costs the same amount of money as market basket D? 10. Suppose the price of coffee is 60 cents a cup. a. What is the consumer's income? b. What is the price of a donut? c. What is the slope of the budget line? d. What is the slope of the indifference curve at B? e. What is the consumer's marginal rate of substitution at point B? At point B, the consumer's marginal rate of substitution is equal to a. 2/3, which means the consumer will give up 2/3 of a donut to get an extra cup of 11. coffee. h means the consumer will give up 2/3 of a cup of coffee to get an extra donut. c. 3/2, which means the consumer will give up 1.5 donuts to get an extra cup of coffee. d. the price ratio, but we can't tell what that is without more information. Donuts per weelk 10 15 Cups of coffee per week Figure 3-7 Questions 12 to 14 refer to Figure 3-8 12. The slope of indifference curve Us at point G is a. the same as the slope of U2 at F. b. less than the slope of U2 at F. same as the slope at Ui at E greater than the slope of Uz at F but less than the slope of Us at EExplanation / Answer
According to the Chegg answering guidelines, i can answer the first four questions including the subparts.
9)a) A consumer maximises its utility at a point where the budget line is tangent with the highest attain able IC. Here the IC labelled as U2 is the highest attainable IC tangent to the budget line. So, the market basket labelled as B is the equilibrium basket.
b) The market baskets which are unattainable are the baskets lying abobve the budget line and they are A and C.
c) The consumer is indifferen between basket D and basket E since bothe lies on the same IC labelled U1 and gives him the same level of satisfaction.
d) Any market baskets which lies on the same budget line costs the same. Here the basket D and B lies on the budget line. Thus the cost of the basket which is same as that of basket D is the basket labelled B.
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