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##### AAMicroeconomics: An Intuitive Approach (with and without Calculus) Chapter Z

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solution

**Question**

Question;1. The;following changes in a consumer?s economic circumstances result in a steeper;budget line with the vertical intercept unchanged. (Denote the good on the;horizontal as good 1 and the good on the vertical as good 2.);a.;A kpercent decrease;in the price of good 2 combined with a kpercent decrease in income;b.;A kpercent increase;in the price of good 2 combined with a kpercent decrease in income;c.;A kpercent decrease;in the price of good 2 combined with a kpercent increase in income;d.;A kpercent increase;in the price of good 2 combined with a kpercent increase in income.;e.;None of the above;2. Suppose;inflation comes in the form of an across-the board increase in all prices by;some percentage k. For a consumer with exogenous income operating in a;2-good world, this will cause the budget constraint to;a.;rotate inward;d.;shift inward in a parallel;way;b.;rotate outward;e.;none of the above;c.;shift out in a parallel way;3. Suppose;you are given a coupon for pizza. This coupon lowers the price for each;additional pizza you buy by 5% for each addition pizza you buy. What happens to;your budget constraint, with pizza on the horizontal axis and a composite good;on the vertical?;a.;The vertical intercept;remains the same but the slope becomes steeper as more pizzas are bought.;b.;The vertical intercept;increases and the slope becomes steeper as more pizzas are bought.;c.;The vertical intercept;remains the same but the slope becomes shallower as more pizzas are bought.;d.;The vertical intercept;increases but the slope becomes shallower as more pizzas are bought.;e.;None of the above.;4. Suppose;the government wants to discourage excessive consumption of alcohol. It;therefore imposes a per-unit tax on alcohol that increases as more alcohol is;bought by a consumer at a store. What happens to a consumer?s budget at a;liquor store (with liters of alcohol on the horizontal axis and a composite;good on the vertical) --- assuming the consumer takes only one trip to the;store.;a.;The vertical intercept;decreases and the slope becomes shallower as more alcohol is bought.;b.;The vertical intercept;remains constant but the slope becomes shallower as more alcohol is bought.;c.;The vertical intercept;decreases and the slope becomes steeper as more alcohol is bought.;d.;The vertical intercept;remains constant but the slope becomes steeper as more alcohol is bought.;e.;None of the above.

Paper#55019 | Written in 18-Jul-2015

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