A consumer has two goods in his consumption bundle: bread and coffee. The current price of bread is $2.00 per loaf and the price of coffee is $8.00 per cup. What is the relative price of bread to coffee? (bread per unit of coffee)? 4 (enter your response round to one or two decimal places as appropriate). Suppose that the price of bread increases by 15% and the price of coffee increases by 10% The relative price (bread per unit of coffee) has decreased.
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The price of bread is $2.00 per loaf, and the price of coffee is $8.00 per cup. Relative price = Price of bread / Price of coffee = $2.00 / $8.00 = 0.25 Show more…
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Suppose that in 2007 the absolute price of bread is $$\$ 2$$ per loaf and the absolute price of wine is $$\$ 6$$ per bottle. In 2008 , the absolute price of bread is $$\$ 4$$ per loaf and the absolute price of wine is $$\$ 8$$ per bottle. Has the relative price of bread risen or fallen? What about the relative price of wine?
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Suppose that Omar's marginal utility for cups of coffee is constant at 1.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first he eats, 9 for the second, 8 for the third, and so on (declining by 1 per additional doughnut). Suppose that coffee costs $1 per cup, and so do the doughnuts. Omar has a budget that he can only spend on coffee, doughnuts, or both. How big would that budget have to be before he would spend a dollar buying his first cup of coffee?
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