The students in an eighth -grade class had a dance. They spent $500 for a local band. The equation below can be used to find the total profit, y, if the students sold x tickets to the dance.
y = 4x – 500
What does the 4 represent in the equation? Ans: The profit made from selling x tickets
Find error and Justify by giving the right solution
Answers
Answer:
Chapter 4
Individual and Market Demand
Questions for Review
1. Explain the difference between each of the following terms:
a. a price consumption curve and a demand curve
The price consumption curve (PCC) shows the quantities of two goods a consumer will purchase
as the price of one of the goods changes, while a demand curve shows the quantity of one good
a consumer will purchase as the price of that good changes. The graph of the PCC plots the
quantity of one good on the horizontal axis and the quantity of the other good on the vertical axis.
The demand curve plots the quantity of the good on the horizontal axis and its price on the vertical
axis.
b. an individual demand curve and a market demand curve
An individual demand curve plots the quantity demanded by one person at various prices. A market
demand curve is the horizontal sum of all the individual demand curves. It plots the total quantity
demanded by all consumers at various prices.
c. an Engel curve and a demand curve
An Engel curve shows the quantity of one good that will be purchased by a consumer at different
income levels. The quantity of the good is plotted on the horizontal axis and the consumer’s income
is on the vertical axis. A demand curve is like an Engel curve except that it shows the quantity
purchased at different prices instead of different income levels.
d. an income effect and a substitution effect
Both the substitution effect and income effect occur because of a change in the price of a good.
The substitution effect is the change in the quantity demanded of the good due to the price change,
holding the consumer’s utility constant. The income effect is the change in the quantity demanded
of the good due to the change in purchasing power brought about by the change in the good’s price.
2. Suppose that an individual allocates his or her entire budget between two goods, food and
clothing. Can both goods be inferior? Explain.
No, the goods cannot both be inferior; at least one must be a normal good. Here’s why. If an individual
consumes only food and clothing, then any increase in income must be spent on either food or clothing
or both (recall, we assume there are no savings and more of any good is preferred to less, even if the
good is an inferior good). If food is an inferior good, then as income increases, consumption of food
falls. With constant prices, the extra income not spent on food must be spent on clothing. Therefore
as income increases, more is spent on clothing, i.e., clothing is a normal good.
3. Explain whether the following statements are true or false:
Answer:
The price per ticket as a answer