Compare the following two pairs of goods:

• Coke and Pepsi
• Skis and ski bindings

In which case will the consumer respond more to a change in the relative price of the two goods?

Compare the following two pairs of goods:

Coke and Pepsi

Skis and ski bindings

In which case are the two goods complements? In which case are they substitutes?

Compare the following two pairs of goods:

• Coke and Pepsi
• Skis and ski bindings

In which case do you expect the indifference curves to be fairly straight, and in which case do you expect the indifference curves to be very bowed? In which case will the consumer respond more to a change in the relative price of the two goods?

Does a competitive firm’s price equal its marginal cost in the short run, in the long run, or both? Explain.

You consume only soda and pizza. One day, the price of soda goes up, the price of pizza goes down, and you are just as happy as you were before the price changes. a. Illustrate this situation on a graph. b. How does your consumption of the two goods change? How does your response depend on in come and substitution effects? c. Can you afford the bundle of soda and pizza you consumed before the price changes?

Consider the following government-provided goods. Which of these goods necessarily require funding via general taxation (as opposed to direct user fees)?

a. Street lights.

Suppose that Calvin considers Pepsi and Coke to be perfect substitutes. They taste the same to him, and he gets exactly the same amount of enjoyment from drinking a can of Pepsi or a can of Coke.

How will Calvin decide whether to buy Pepsi or Coke?

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

Show the effect of the frost on Maya's budget constraint.

A college student has two options for meals: eating at the dining hall for $6 per meal, or eating a Cup O’ Soup for$1.50 per meal. Her weekly food budget is $60. a. Draw the budget constraint showing the trade-off between dining hall meals and Cups O’ Soup. Assuming that she spends equal amounts on both goods, draw an indifference curve showing the optimum choice. Label the optimum as point A. b. Suppose the price of a Cup O’ Soup now rises to$2. Using your diagram from part (a), show the con sequences of this change in price. Assume that our student now spends only 30 percent of her income on dining hall meals. Label the new optimum as point B. c. What happened to the quantity of Cups O’ Soup consumed as a result of this price change? What does this result say about the income and substitution effects? Explain. d. Use points A and B to draw a demand curve for Cup O’ Soup. What is this type of good called?

Bob is pushing a box across the floor at a constant speed of 1 m/s, applying a horizontal force whose magnitude is 20 N. Alice is pushing an identical box across the floor at a constant speed of 2 m/s, applying a horizontal force. (a) What is the magnitude of the force that Alice is applying to the box?

Jennifer divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

a. Show the effect of the frost on Jennifer's budget constraint.

b. Show the effect of the frost on Jennifer's optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

c. Show the effect of the frost on Jennifer's optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissants.

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

Show the effect of the frost on Maya's optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

Show the effect of the frost on Maya's optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissants.

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

a. Show the effect of the frost on Maya's budget constraint.

b. Show the effect of the frost on Maya's optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

c. Show the effect of the frost on Maya's optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissants.