If the price of good X is $4, the price of good Y is $2, and...
If the price of good X is $4, the price of good Y is $2, and the marginal rate of substitution is currently 4, how could consumer increase their utility without decreasing their total expenditure?
a) Purchase more Y and less X
b) Purchase more X and less Y
c) Do nothing; cannot improve utility while keeping spending the same
d) Purchase more of X and Y
Homework Answers
Ans) the correct option is b) Purchase more X and less Y
Since marginal rate of substitution exceeds the price ratio so more of good X should be consumed and less of good Y to get the equality between MRS and price ratio.
Suppose the price of Good X is $4 and the price of Good Y is $3....
Suppose the price of Good X is $4 and the price of Good Y is $3. If a consumer has a Marginal Rate of Substitution (MRSxy) of 2 for the bundle they are considering, then given their budget constraint, the consumer... Select one O a. Cannot reach a higher level of utility given their budget constraint. Ob. Would have a higher utility if they bought more of Good X. c. Would have a higher utility if they bought less of...
Assume that Clark spends his entire income on the purchase of two goods, X and Y....
Assume that Clark spends his entire income on the purchase of two goods, X and Y. If his income and the prices of good X and Y all double, Clark will double the purchase of goods X and Y buy more of good X and less of good Y buy less of good X and more of good Y buy less of both goods X and Y buy the same amounts of goods X and Y According to the law...
Question 14 (1 point) If the price of good x changes relative to good y, the...
Question 14 (1 point) If the price of good x changes relative to good y, the substitution effect suggests that consumers will: buy more of the cheaper good and less of the more expensive. buy more of the more expensive good and less of the cheaper. buy more of both goods. buy less of both goods Question 15 (1 point) As consumers consume more of a good, we expect marginal utility to Increase Decrease Remain constant. Impossible to tell.
Cole is about to purchase 4 units of good A and 6 units of good B....
Cole is about to purchase 4 units of good A and 6 units of good B. The price of A is $3 and the price of B is $2. Cole has only $24 to spend. Assume that the marginal utility of the fourth unit of A is 18 and the marginal utility of the sixth unit of B is 6. If Cole wants to maximize utility he should buy less of B and more of A. Cole cannot maximize utility...
2) Suppose that the price of good X is $2 and the price of good Y...
2) Suppose that the price of good X is $2 and the price of good Y is $3. You have $90 to spend and your preferences over X and Y are defined as: U(x,y) = x2/3y1/3 Keep in mind that we review this concept because consumer choice is based on their preferences. People demand items that fulfill their Utility (perhaps happiness). As a result, we need to visualize how an individual’s budget is allocated to create the highest level...
1. The utility added by consuming an additional unit of a good is known as __________...
1. The utility added by consuming an additional unit of a good is known as __________ utility A. total B. increasing C. marginal D. diminishing 2. The combination of Good A and Good Z that gives consumer equilibrium can be computed by which of the following? A. Using the marginal utility of Good Z/price of Good A = marginal utility of Good Z/price of Good A B. Using the total utility of Good A/price of Good A = total utility...
Suppose a consumer had a utility function given by: U=X^4*Y. If the price of Good X...
Suppose a consumer had a utility function given by: U=X^4*Y. If the price of Good X (Px) is $6 and the price of Good Y is $2.40 then what is the utility maximizing quantity of Good X the consumer will purchase with a budget of $7.50? (Round to the nearest decimal place if necessary.)
A consumer has the utility function U(X, Y) = (X + 2)(Y + 4). Her income is...
A consumer has the utility function U(X, Y) = (X + 2)(Y + 4). Her income is $100, the price of X is $4, and the price of Y is $5. In order to maximize utility subject to her budget constraint, how many units of X and Y will our consumer choose to purchase? Sketch a budget line – indifference curve diagram illustrating this optimum. Label this optimum A. Suppose the price of X increases to $8, while income and the price...
A consumer’s marginal rate of substitution (MRSxy) is always 4. The price of Good X is...
A consumer’s marginal rate of substitution (MRSxy) is always 4. The price of Good X is $10 and the price of Good Y is $2. Which of the following will be true? a. The consumer will only buy Good Y. b. The consumer will only buy Good c. The consumer will spend all her income and buy some of Good X and some of Good Y. d. The consumer's expenditures on Good X will be four times more than her...
Q5. Suppose that marginal utility of Good X = 100, the price X is $10 per...
Q5. Suppose that marginal
utility of Good X = 100, the price X is $10 per unit, and the price
of Y is $5 per unit. Assuming that the consumer is in equilibrium
and is consuming both X and Y, what must the marginal utility of Y
be?
P12. The following tables
illustrate Eileen’s utilities from watching first-run movies in a
theater and from renting movies from a video store. Suppose that
she has a monthly movie budget of $36,...
Suppose the price of Good X is $4 and the price of Good Y is $3. If a consumer has a Marginal Rate of Substitution (MRSxy) of 2 for the bundle they are considering, then given their budget constraint, the consumer... Select one O a. Cannot reach a higher level of utility given their budget constraint. Ob. Would have a higher utility if they bought more of Good X. c. Would have a higher utility if they bought less of...
Question 14 (1 point) If the price of good x changes relative to good y, the substitution effect suggests that consumers will: buy more of the cheaper good and less of the more expensive. buy more of the more expensive good and less of the cheaper. buy more of both goods. buy less of both goods Question 15 (1 point) As consumers consume more of a good, we expect marginal utility to Increase Decrease Remain constant. Impossible to tell.
Cole is about to purchase 4 units of good A and 6 units of good B. The price of A is $3 and the price of B is $2. Cole has only $24 to spend. Assume that the marginal utility of the fourth unit of A is 18 and the marginal utility of the sixth unit of B is 6. If Cole wants to maximize utility he should buy less of B and more of A. Cole cannot maximize utility...
Q5. Suppose that marginal
utility of Good X = 100, the price X is $10 per unit, and the price
of Y is $5 per unit. Assuming that the consumer is in equilibrium
and is consuming both X and Y, what must the marginal utility of Y
be?
P12. The following tables
illustrate Eileen’s utilities from watching first-run movies in a
theater and from renting movies from a video store. Suppose that
she has a monthly movie budget of $36,...
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