Asked by Brendan Lorenzana on Jul 25, 2024
Verified
Murphy used to consume 100 units of X and 50 units of Y when the price of X was $2 and the price of Y was $4.If the price of X rose to $6 and the price of Y rose to $5, how much would Murphy's income have to rise so that he could still afford his original bundle?
A) $750
B) $250
C) $450
D) $500
E) None of the above.
Original Bundle
In economics, this refers to a specific combination of goods that a consumer initially chooses given their budget and prices.
Price Rise
An increase in the cost of goods or services, typically signifying inflation or market changes.
- Determine the necessary augmentation in earnings to sustain consumption patterns amid price alterations.
- Examine the effects of fluctuations in prices on the decision-making and budget distribution of consumers.
Verified Answer
JV
jorge velascoJul 31, 2024
Final Answer :
C
Explanation :
Murphy's original consumption pattern costs him:
$(100 units of X * $2) + (50 units of Y * $4) = $200 + $200 = $400
If the price of X rises to $6 and the price of Y rises to $5, the original bundle will cost him:
(100 units of X * $6) + (50 units of Y * $5) = $600 + $250 = $850
So, Murphy's income would have to rise by $450 ($850-$400) to afford his original bundle. Therefore, the answer is (C) $450.
$(100 units of X * $2) + (50 units of Y * $4) = $200 + $200 = $400
If the price of X rises to $6 and the price of Y rises to $5, the original bundle will cost him:
(100 units of X * $6) + (50 units of Y * $5) = $600 + $250 = $850
So, Murphy's income would have to rise by $450 ($850-$400) to afford his original bundle. Therefore, the answer is (C) $450.
Learning Objectives
- Determine the necessary augmentation in earnings to sustain consumption patterns amid price alterations.
- Examine the effects of fluctuations in prices on the decision-making and budget distribution of consumers.