3. Anna and Valentina are both avid gardeners who plant vegetables each year using seedlings from...
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3. Anna and Valentina are both avid gardeners who plant vegetables each year using seedlings from the local nursery. Suppose that the women face the following declining price structure for seedlings: The first 32 seedlings can be purchased for $2.50/seedling, while the next 24 seedlings can be purchased for a price of $1.75/seedling. Any remaining seedlings can then be purchased at a price of $1.00/seedling. Finally, suppose Anna and Valentina each devote $160/year to the purchase of seedlings (S) and a composite good (Y). a) Graph the budget constraint both women face for the composite good (Y) and seedlings (S), where the latter is measured in seedlings per year. Be sure to label enough points to accurately depict the budget constraint. b) Write down the mathematical equations for the entire budget constraint. c) Suppose Anna considers 3 units of Y a perfect substitute for 1 seedling. If the pricing structure of seedlings changes such that all seedlings purchased after the first 32 are priced at $1.75/seedling, will Anna purchase more or fewer seedlings than under the original pricing structure? Will she be better off, worse off, or equally well off? How do you know? d) Suppose Valentina considers 0.68 units of Y a perfect complement to 1 seedling. If the pricing structure of seedlings changes such that all seedlings purchased after the first 32 are priced at $1.75/seedling, will Valentina purchase more or fewer seedlings than under the original pricing structure? Will she be better off, worse off, or equally well off? How do you know? 3. Anna and Valentina are both avid gardeners who plant vegetables each year using seedlings from the local nursery. Suppose that the women face the following declining price structure for seedlings: The first 32 seedlings can be purchased for $2.50/seedling, while the next 24 seedlings can be purchased for a price of $1.75/seedling. Any remaining seedlings can then be purchased at a price of $1.00/seedling. Finally, suppose Anna and Valentina each devote $160/year to the purchase of seedlings (S) and a composite good (Y). a) Graph the budget constraint both women face for the composite good (Y) and seedlings (S), where the latter is measured in seedlings per year. Be sure to label enough points to accurately depict the budget constraint. b) Write down the mathematical equations for the entire budget constraint. c) Suppose Anna considers 3 units of Y a perfect substitute for 1 seedling. If the pricing structure of seedlings changes such that all seedlings purchased after the first 32 are priced at $1.75/seedling, will Anna purchase more or fewer seedlings than under the original pricing structure? Will she be better off, worse off, or equally well off? How do you know? d) Suppose Valentina considers 0.68 units of Y a perfect complement to 1 seedling. If the pricing structure of seedlings changes such that all seedlings purchased after the first 32 are priced at $1.75/seedling, will Valentina purchase more or fewer seedlings than under the original pricing structure? Will she be better off, worse off, or equally well off? How do you know?
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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