On Monday, Beth buys 4 peanuts and 6 cashews. On Tuesday, the price .pdf

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On Monday, Beth buys 4 peanuts and 6 cashews. On Tuesday, the price of peanuts rises and the price of cashews falls. The Monday and Tuesday budget lines cross at (5, 5). a) On which day is Beth happier? b )True or False: On Tuesday, Beth might buy 7 peanuts. On Wednesday, the Tuesday prices remain in effect, but Beth’s income changes so that she is exactly as happy on Wednesday as on Monday. c) Illustrate Beth’s Monday, Tuesday and Wednesday optima. Label them M, T and W. d) True or False: If peanuts are an inferior good, Beth will certainly consume fewer peanuts on Tuesday than on Monday. Justify your answer by referring to the locations of points M, T and W. Solution a. Monday beth is happy as she bought 4 peanuts and 6 cashews b. On tuesday the prices of Peanuts increased and beth bought 7 peanuts and on wednesday as beth bought the peanuts and the price of the peanuts unaffetcted beth was as happy as on monday keeping in view of the possession the peanuts. c. M: Beth\'s monday was good as she bough 4 peanuts and 6 cashews with the available budget. T: On tuesday the prices of the peanuts were up and cashew are down, whihc made beth bought 7 peanuts W: On wedneday beth was happy as the prices remained unaffected as they were on tuesday and Beth is holding a total of 11 peanuts and 6 cashews, whihc of the same may lead to profits as peanuts are highly consumed good compaed to cashew..

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