quanda21 - Chapter 21 1. Suppose a consumer only buys two...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 21 1. Suppose a consumer only buys two goods: hot dogs and hamburgers. Suppose the price of hot dogs is €1, the price of hamburgers is €2, and the consumer's income is €20. a. Plot the consumer's budget constraint in Exhibit 1. Measure the quantity of hot dogs on the vertical axis and the quantity of hamburgers on the horizontal axis. Explicitly plot the points on the budget constraint associated with the even numbered quantities of hamburgers (0, 2, 4, 6 . . .). Exhibit 1 Answer: See Exhibit 5. Exhibit 5 b. Suppose the individual chooses to consume six hamburgers. What is the maximum amount of hot dogs that he can afford? Draw an indifference curve on the figure above that establishes this bundle of goods as the optimum. Answer: Eight. For the indifference curve, see Exhibit 6.
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Practice Questions to accompany Mankiw & Taylor: Economics 2 Exhibit 6 c. What is the slope of the budget constraint? What is the slope of the
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quanda21 - Chapter 21 1. Suppose a consumer only buys two...

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