a Calculate bundle a and c How many teddy bears should he buy for each bundle b

# A calculate bundle a and c how many teddy bears

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a)Calculate bundle ‘a’ and ‘c’. How many teddy bears should he buy for each bundle? b)An alternative to purchasing teddy bears from downtown is if he buys a membership card from Ardene’s. As a result, the price will decrease by \$3. What is the maximum amount that he is willing to pay for the membership card? c)Provide a fully labelled diagram showing all the three bundles. Let movie tickets be on the x axis and explain which bundle gives him maximum satisfaction. 69. Albert likes to spend his time going go-kart racing which costs \$18 and paintballing which costs 9\$ per game, yet he should be studying for economics .Some students in his EC0200 class have created a group for homework help and studying, but they charge each member when they join. A local go-kart track in Mississauga has agreed that it will allow members of the study group to go go-karting for only 4.50\$. Albert has an income of 72\$ and his preferences can be described by the utility function U=GP. a)Provide a diagram showing Albert’s utility maximizing bundle and call this bundle “a”. b)Albert could definitely use the help from the ECO200 study group. How much is Albert willing to pay to join the group so that he will only have to pay \$4.50 when he goes go-karting? c)Assume Albert has joined the study group. The other members have decided they no longer want him in the group because he never shows up to study sessions, and they want to pay him as little as possible to leave the group. How much money is Albert willing to accept to leave the group? Show this on the graph and label it “d”. 70.Is Cost-Co only appropriate for poor people? Provide a fully labelled Indifference Curve diagram showing the Compensating Variation. Provide a brief, well structured argument and modify your University of Toronto, Department of Economics
71. Stella is a crazy fan of clubbing and drinking alcohol. For her, Scotch whisky and vodka are perfect substitutes. The Scotch is \$4 per order and the vodka is \$1 per order. To expand the business, the club which she always goes has decided to issue member cards on buying scotch. After being the member, the price of scotch decreases to \$2 per order. Stella plans to spend \$12 on scotch and vodka tonight. Her utility function for the two drinks is U = 3S + V.

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• Spring '11
• BAILEY
• Utility, indifference curves, Department of Economics

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