ECON 202 CHAP 1 HW (1-8)

a. 3 pounds of potatoes b. 3 pounds of potatoes

Janice really likes potatoes. Potatoes cost $0.50 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30. a. How many pounds of potatoes will she purchase? b. What if she only had $2.00 to spend? Explanation: The following table summarizes the cost and value of potatoes for Janice: ............................................cost $ .......value 1st pound ................... $0.50 ............$1.50 2nd pound ..................$0.50 ...........$1.14 3rd pound ..................$0.50 .............$1.05 4th pound & up .........$0.50 ...........$0.30 a. Janice will purchase potatoes until the value of potatoes is less than the cost of potatoes or until her income has been exhausted. From the table, we can see that the cost of the fourth of potatoes is greater than its value. Therefore, Janice will purchase a total of three pounds of potatoes with her original income of $5.00. b. Now assume Janice only has $2.00 to spend on potatoes. She will purchase three pounds of potatoes at a total cost of $1.50.

a. 3 pounds of potatoes b. 2 pounds of potatoes

Janice really likes potatoes. Potatoes cost $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30. a. How many pounds of potatoes will she purchase? b. What if she only had $2 to spend? Explanation: a. Janice will purchase potatoes until the value of potatoes is less than the cost of potatoes or until her income has been exhausted. For example, assume Janice has $5.00 to spend on potatoes or other items and the cost of a pound of potatoes is $1. Now assume the first pound of potatoes is worth $1.50 to Janice. She will purchase this pound of potatoes, since the value of the pound of potatoes ($1.50) is greater than the cost ($1). If the second pound is worth $1.14 and the third pound is worth $1.05, then Janice will purchase these as well, since the value exceeds the cost of $1. If all remaining pounds are worth $0.30, then Janice will not purchase these because the value is less than the cost. Thus, Janice will purchase 3 pounds of potatoes at a total cost of $3.00. b. Now assume Janice only has $2.00 to spend on potatoes. She will purchase the first pound because it is worth $1.50 to her and it only costs $1. She will purchase the second pound because it is worth $1.14. She has now spent her entire income on potatoes. She would like to purchase the third pound because the value of this pound of potatoes is $1.05, but she does not have the income to make this purchase. Thus, Janice will purchase 2 pounds of potatoes at a total cost of $2.00.

4 Hours

Pham can work as many or as few hours as she wants at the college bookstore for $9 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or other potential jobs. One potential job, at a café, will pay her $12 per hour for up to 6 hours per week. She has another job offer at a garage that will pay her $10 an hour for up to 5 hours per week. And she has a potential job at a daycare center that will pay her $8.50 per hour for as many hours as she can work. If her goal is to maximize the amount of money she can make each week, how many hours will she work at the bookstore? Explanation: Pham will choose to work at the bookstore as long as the wage rate at the bookstore exceeds her other opportunities. However, if another job offers a higher wage rate, she will choose employment there. She will work until her total time allotment (for work) is exhausted. She will choose to work at the café for the full 6 hours because the wage rate at the café is $12 per hour, which is greater than the wage rate at the bookstore of $9. This leaves her with 9 hours of work time remaining. Next, she will choose to work at the garage for the full 5 hours because the wage rate here is $10, which again is greater than the bookstore wage rate of $9. After this decision, she only has 4 hours of work time remaining. She will choose to work these last 4 hours at the bookstore because the bookstore wage rate of $9 exceeds the daycare center wage rate of $8.50.

a. Increase b. Decrease c. Increase

Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease? a. Your budget increases from $100 to $150 while the prices stay the same: b. Your budget remains $100, the price of books remains $25, but the price of movie tickets rises to $20: c. Your budget remains $100, the price of movie tickets remains $10, but the price of a book falls to $15: Explanation a. Increase, because a larger budget allows you to purchase not only the combinations that you could afford before but also new combinations that you could not afford before (for example, you can now afford to purchase 4 books and 5 movie tickets). b. Decrease, because certain combinations are no longer affordable (for example, you can no longer purchase 10 movie tickets with your $100 budget). c. Increase, because the lower price allows you to purchase combinations that you could not afford before (for example, you can now purchase 6 books and 1 movie ticket).

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