Ch04 Textbook Answers

Ch04 Textbook Answers - Chapter 4 Exercises 1- 4

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Books Wine Price-Consumption Curve 8 9 10 11 1 2 3 4 5 6 7 Chapter 4 Exercises 1- 4 1.  An individual sets aside a certain amount of his income per month to spend on his two  hobbies, collecting wine and collecting books.   Given the information below, illustrate  both the price-consumption curve associated with changes in the price of wine and the  demand curve for wine. Price Wine Price Book Quantity Wine Quantity Book Budget $10 $10 7 8 $150 $12 $10 5 9 $150 $15 $10 4 9 $150 $20 $10 2 11 $150 The price-consumption curve connects each of the four optimal bundles given in the  table, while the demand curve plots the optimal quantity of wine against the price of  wine in each of the four cases.  See the diagrams below.   2.  An individual consumes two goods, clothing and food.  Given the information below,  illustrate both the income-consumption curve and the Engel curve for clothing and food. Price Clothing Price Food Quantity Clothing Quantity Food Income $10 $2 6 20 $100 $10 $2 8 35 $150 $10 $2 11 45 $200 $10 $2 15 50 $250 Price Wine Demand Curve 5 10 15 20 1 2 3 4 5 6 7
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The income-consumption curve (see diagram  at right) connects each of the four optimal  bundles given in the table above.   As the  individual’s income increases, the budget line  shifts out and the optimal bundles change.  The Engel curve for each good illustrates the  relationship between the quantity consumed 
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This note was uploaded on 09/24/2009 for the course ECON 2296 taught by Professor Gray during the Spring '09 term at Langara.

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Ch04 Textbook Answers - Chapter 4 Exercises 1- 4

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