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

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**Question**

Question;1. Consider;a consumer with a choice set that emerges from an exogenous income I.;Suppose that, as a result of changes in a consumer?s economic circumstances, the;budget line rotates outward, with the vertical intercept remaining unchanged;but the horizontal intercept shifting to the right. How could this have;happened if the price of the good on the horizontal axis did not change?;2. Consider;a consumer with a choice set that emerges from an exogenous income I.;Suppose that, as a result of changes in a consumer?s economic circumstances;the budget line rotates outward, with the vertical intercept remaining;unchanged but the horizontal intercept shifting to the right. Demonstrate;using the budget line equation, how this could have happened if the price of;the good on the horizontal axis did not change?;3. Suppose;that the price of a TV is $200 and he price of an MP3 player is $50. What is;the opportunity cost of a TV (in terms of MP3 players), and what is the;opportunity cost of an MP3 player (in terms of TVs)?;4. Derive;the budget line equation for the case where good 2 is a composite good. What is;the vertical intercept and what is the slope?

Paper#55020 | Written in 18-Jul-2015

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