Question: 10. Deriving demand from an indifference map Eileen recently moved to Dallas, where they developed a taste for drinking Americanos and eating danishes. Assume throughout




10. Deriving demand from an indifference map Eileen recently moved to Dallas, where they developed a taste for drinking Americanos and eating danishes. Assume throughout this problem that the price of an Americano is held constant at $2. On the following graph, the purple curves ([1 and 12) describe two of Eileen's indifference curves. The lines BC1 and 8C2 represent two budget constraints. Points X and Y show Eileen's optimal consumption bundles subject to the budget constraints. \fGiven the preceding graph and knowing the price of an Americano is $2, Eileen's available income for Americanos and danishes is Using the income amount you just computed, complete the following table by finding the price of a danish when BC1 represents Eileen '5 budget constraint and when BCZ represents her budget constraint. Then indicate the quantity of danishes consumed in each of those scenarios. Price Consumption When Eileen's budget constraint is... (Dollars per danish) (Danishes) BCl 3C2 Given the price-quantity combinations from the preceding table, use the blue line (circle symbol) to plot Eileen's demand for danishes on the following graph. Hint: Assume that Eileen's demand for danishes is a straight line. You should derive two points on the demand curve from the preceding graph. Then place the blue line on the following graph so that it passes through these two points.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
