Lucas chooses between water and all other goods. If he spends all his money on water, he can buy 15 thousand gallons per week. At current prices, his optimal bundle is e1, where he buys both types of goods. Show e1 in a diagram. During a drought, the government limits the number of gallons per week that he may purchase to 10 thousand. Using diagrams, discuss under which conditions his new optimal bundle, e2, will be the same as e1. If the two bundles differ, can you state where e2 must be located relative to e1?
Answer to relevant QuestionsGasoline is typically less expensive in the United States than across the border in Canada but now suppose that U. S. gasoline price rises above that in Canada due to a change in taxes. How would the gasoline-purchasing ...Based on panel a in figure, show that Angela would accept the BOGOF promotion or the half-price promotion. Show that she may choose to stay either three or four nights with the half-price promotion depending on the exact ...In the Managerial Problem, suppose that entertainment is relatively more expensive in London than in Seattle so that the LL budget line cuts the LS budget line from below rather than from above as in the figure in the ...According to Card (2009), (a) workers with less than a high school education are perfect substitutes for those with a high school education, (b) “high school equivalent” and “ college equivalent” workers are ...Is it possible that a firm’s production function exhibits increasing returns to scale while exhibiting diminishing marginal productivity of each of its inputs? To answer this question, calculate the marginal productivities ...
Post your question