1. After careful scrutiny, Robbin budgets $12/week for Wings ‘n’ Suds
After careful scrutiny, Robbin budgets $12/week for Wings ‘n’ Suds. Consider the following:
Graph and label the axes to show how much of each good Robbin is able to buy, if the price of buffalo wing is $0.50, while the price of Coca-Cola is $1.50.
In order to attract more customers to Wings ‘n’ Suds , management decides to lower the price of Coca-Cola to a buck. Show what happens to Robbin’s budget line compared to (a).
Instead of (b), assume there is a sudden shortage of buffalo wings available.
Now, Wings ‘n’ Suds has to raise the price of a wing to $3. Show how this event changes Robbin’s budget line relative to (a).
Robbin, after winning $1,000 in the Texas lottery, decides that she can now spend $36/week at Wings ‘n’ Suds. Show how this event changes Robbin’s budget line relative to (a).
e. What combination of wings and Coca-Cola should Robbin buy in (a), (b), (c), and (d)?

2. Suppose that a college student can spend $50 on entertainment
Suppose that a college student can spend $50 on entertainment. This student derives satisfaction only from watching movies and playing video games. The price of a movie is $5 and the price of a video game is $2.
Draw the correct budget line for this student.
Label the axis.
Provide the numerical amounts of movies and video games at the “extreme points.”

3. Betty and Wilma wish to buy T-shirts and shoes
Betty and Wilma wish to buy T-shirts and shoes. Betty has a budget of $600, while Wilma has a budget of $1,200. using the indifference curve analyses given in the following, determine prices fro the T-shirts and shoes. For which commodity can you derive a demand curve? Derive this curve for Betty and Wilma. Finally, derive the market demand curve, assuming that they are the only consumers.
Quantity of T-shirts
Pairs of Shoes
Price of
T-shirts
Price of Shoes
Betty
Wilma
continued...

4. continued...

5. Betty
Wilma
Market

6. Assume that for a given consumer, the marginal utility of Dreyer’s Ice Cream is 120, and the price of Dreyer’s is $4 per gallon. Also, assume that the marginal utility of Blue Bell Ice cream is 160, and the price of Blue Bell is $5 per gallon. This consumer
a. is in equilibrium.
b. should buy more Blue Bell.
c. should buy more Dreyer’s.
d. can’t tell; insufficient information.

7. Derive separate Engel curves for products A and B from the following indifference curve analysis. Assume PA = $1.50 and PB = $2.25. Are these goods normal or inferior?
Point
Quantity of A
Quantity of B
Income D E F
Engel Curve for Product A
Engel Curve for Product B
continued...

8. QA E F D QB