12. Savings decisions " "‘"
Larry is a Nobel laureate who teaches chemistry at a university where he is paid a yearly salary of $160,000. He plans to take the next year off ir-clud
to write a book, so he won‘t earn any money next year. He is c
1|]. Deriving demand from an indifference map
Susan lives in Dallas and enjoys drinking lattes and eating scones. The price of a late is held constant at $3 throughout this problem.
On the following diagram, the purple curves (F1 and F2) represent two of
4. Consumer surplus for an individual and a market
The following graph shows Rosa's weekly demand for cheesecake, represented by the blue line. PointA represents a point along her weekly
demand. The market price of cheesecake is $3.00 per slice, as shown
5. Complements and substitutes
Lorenzo enJoys eating marshmallow ﬂuff sandWIches and drlnking milk. He is particular about proportions, though: For every marshmallow ﬂuff
sandwich he eats, he must drink exactly one glass of milk and vice versa.
3. Consumer surplus for a group of consumers
The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for smart phones. The market price of a
smart phone is shown by the black horizontal line at $150.
9. Income and substitution effects
Manuel and Poornima Taylor live in New York City and enJoy going out to fancy restaurants for dinner and to diners for breakfast. On the
followmg diagram, the purple curves l1 and 12 represent two of their indifference c
1. The circular flow model
The following diagram presents a circular ﬂow model of a simple economy. The outer set of arrows (shown in green) shows the ﬂow of doliars,
and the inner set of arrows (shown in red) shows the corresponding ﬂow of inputs and out
1. An individual's budget
Suppose Kenji has a yearly budget of $120 to spend on coffee and yogurt. Coffee is priced at $2 per cup, and yogurt is priced at $6 per
If Kenji spends his entire $120 on coffee, he can buy 60 9' cups of coffee. If he
13. Application: Demand elasticityr and agriculture
Consider the market for wheat. The following graph shows the weekly demand for wheat and the weekly supply of wheat. Suppose new farming
technology is developed that allows farmers to grow more crops wit
a. wha chm-Id nay the tax?
The quwwmq graph shuws the \abur market fur research asswstahts W the ﬁctmha\ country at Academe. The
euuTITbhum wage Ts $10 berhaur, and the egumbnum number of research assTstants Ts mu.
Suppose the waerhment has demded tu Thst
4. Opportunity cost and production possibilities
Charles is a skilled toy maker who is able to produce both cars and drums. He has 8 hours a day to produce toys. The following table shows th-
daily output resulting from various possible combinations of hi
9. Market efficiency and market failure
Suppose that the following graph shows a free market equilibrium with CE as the equillbrium quantity.
For an output level below OE, the value of a unit to a buye
12. Savings decisions "
Yakov is a professor who teaches genetics at a university where he is paid a yearly salary of $200,000. He plans to take the next year off to
write a book, so he won't earn any money next year. He is currently trying to ﬁgu
3. Indifference curves and preferences
Manuel likes both soda and ice cream. Assume that the "more is better" principle applies to Manuel; that is, he would always prefer to consume
more of either good, holding the consumption of the other good constant.
4. Minimum wage legislation
The following graph shows the labor market in the fast-food industry in the ﬁctional town of Supersize City.
Use the graph input tooir to heip you answer the foiiowing questions. You wiii not be graded on any changes you make t