5. Cookie Monster loves cookies. He is EQUALLY HAPPY eating a chocolate chip cookie (CC) or...

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5. Cookie Monster loves cookies. He is EQUALLY HAPPY eating a chocolate chip cookie (CC) or an oatmeal raising cookie (OR). He simply likes more cookies, regardless of which type they are. Suppose that the price of a chocolate chip cookie is Currently $3.00, the price of an oatmeal raisin cookie is $1.50, and that Cookie Monster's income is $9.00. Place chocolate chip cookies (CC) on the horizontal axis and oatmeal raisin cookies (OR) on the vertical axis. Show all of the following on the SAME GRAPH and label it carefully. a. (7 pts) Draw Cookie Monster's budget constraint and a few of his indifference curves. (Be sure they are consistent with the description of his preferences above. You won't be able to determine actual numbers for on the axes and with numbers, the bundle that Cookie Monster must currently be consuming. b. (4 pts) Suppose that due to a decrease in the price of chocolate, the price of a chocolate chip cookie decreases to $1.00. Draw Cookie Monster's new budget constraint and indicate his new consumption point, both graphically on the axes and with numbers. (Note that you may have to draw in some additional indifference curves.) (8 pts) Draw the decomposition budget constraint and indicate the decomposition bundle on the axes. Carefully indicate the substitution effect and income effect (along the CC-axis) associated with this price decrease. What is the actual size of each effect (in terms of the quantity of chocolate chip cookies)? c. O 5. Cookie Monster loves cookies. He is EQUALLY HAPPY eating a chocolate chip cookie (CC) or an oatmeal raising cookie (OR). He simply likes more cookies, regardless of which type they are. Suppose that the price of a chocolate chip cookie is Currently $3.00, the price of an oatmeal raisin cookie is $1.50, and that Cookie Monster's income is $9.00. Place chocolate chip cookies (CC) on the horizontal axis and oatmeal raisin cookies (OR) on the vertical axis. Show all of the following on the SAME GRAPH and label it carefully. a. (7 pts) Draw Cookie Monster's budget constraint and a few of his indifference curves. (Be sure they are consistent with the description of his preferences above. You won't be able to determine actual numbers for on the axes and with numbers, the bundle that Cookie Monster must currently be consuming. b. (4 pts) Suppose that due to a decrease in the price of chocolate, the price of a chocolate chip cookie decreases to $1.00. Draw Cookie Monster's new budget constraint and indicate his new consumption point, both graphically on the axes and with numbers. (Note that you may have to draw in some additional indifference curves.) (8 pts) Draw the decomposition budget constraint and indicate the decomposition bundle on the axes. Carefully indicate the substitution effect and income effect (along the CC-axis) associated with this price decrease. What is the actual size of each effect (in terms of the quantity of chocolate chip cookies)? c. O