ECN101 Homework 3 Figure 3-1 The following diagram shows two budget lines: A and B.
1. Which of the following could explain the change in the budget line from A to B? a. a decrease in the price of X
b. an increase in the price of Y
c. a decrease in the price of Y
d. More than one of the above could explain this change.
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer’s income is $50. In addition, suppose the consumer’s budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis. 2.Refer to Scenario 3-1. If the price of beer doubles to $2, then the a. budget constraint intersects the vertical axis at 25 beers. b. slope of the budget constraint rises to -2.
c. slope of the budget constraint falls to -4.
d. budget constraint shifts inward in a parallel fashion.
3. Refer to Table 3-1 below. You have an extra ticket to the Midwest Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the ticket. Michael bids $410 for the ticket, and you sell him the ticket. What is his consumer surplus? a. $410
Buyer Willingness to Pay
Figure 3-2 The vertical distance between points A and B represents a tax in the market.
4.Refer to Figure 3-2. The amount of deadweight loss as a result of the tax is a. $105.
5.Refer to Figure 3-3. Which area represents consumer surplus at a price of P2? a. ABD
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