Homework Answers
Answer:
Consumer consumes m units of 1 commodity and n units of other commodity and their corresponding prices are 10 and 40.
Income of the consumer is 180. Given unity function is u = mn
At optimal bundle
Therefore second option is correct
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UES TION 16 A consumer consumes two commodities, m and n, and has a utility function...
4. A consumer has income I = 120. She consumes the goods V (Veggies) and M...
4. A consumer has income I = 120. She consumes the goods V (Veggies) and M (Meat), which have prices Py = 6 and PM = 4 respectively. (a) Use the above information and plug it into the budget re- striction: PV V + PMM = I. Illustrate it in a figure, with V on the horizontal axis. How does the budget line change if the price of M falls so that PM = 2? Show in the figure. (b)...
Consider a consumer with a utility function u(x1, x2) = min{21, 222}. Suppose the prices of...
Consider a consumer with a utility function u(x1, x2) = min{21, 222}. Suppose the prices of good 1 and good 2 are p1 = P2 = 4. The consumer's income is m = 120. (a) Find the consumer's preferred bundle. (b) Draw the consumer's budget line. (c) On the same graph, indicate the consumer's preferred bundle and draw the indifference curve through it. (d) Now suppose that the consumer gets a discount on good 1: each unit beyond the 4th...
4. Charlie likes both apples and bananas. He consumes nothing else. Charlie consumes x bushels of apples per year...
4. Charlie likes both apples and bananas. He consumes nothing else. Charlie consumes x bushels of apples per year and x bushels of bananas per year. Suppose that Charlie's preference is represented in the following utility function: u(x,,Xy)-x,Xy . Suppose that the price of apples is S1, the price of bananas is S2, and Charlie's income is $40. (14 points) a. Draw Charlie's budget line. Plot a few points on the indifference curve that gives Charlie a utility of 150...
3. Michael has preferences over two goods, z1 and r2, represented by the utility function (a)...
3. Michael has preferences over two goods, z1 and r2, represented by the utility function (a) Find the MRS12 associated with this utility function. (b) Use the MRS12, the price ratio, and the budget constraint to find Michael's optimal bundle when m 3000, P50, and 10. for r2. (You will need to calculate the utility at the optimal point in order to do this.) a single graph. Be sure to label the curves, the optimal point, and the axes. (c)...
4- Consumer utility Quantity Total Utility from A Total Utility from B 1 40 37 2...
4- Consumer utility Quantity Total Utility from A Total Utility from B 1 40 37 2 76 72 3 108 105 4 136 136 5 160 165 6 180 192 7 196 217 8 208 237 9 216 252 10 220 262 11 220 267 12 216 267 13 208 262 14 196 252 15 180 237 You are given the above total utilities for different consumption amounts of goods A and B. The consumer has a budget of 60,...
Charlie’s utility function is U(xA, xB) = xAxB. Suppose that the price of apples is 1,...
Charlie’s utility function is U(xA, xB) = xAxB. Suppose that the price of apples is 1, the price of bananas is 2, and Charlie’s income is 40. (a) On a graph, use blue ink to draw Charlie’s budget line. (Use a ruler and try to make this line accurate.) Plot a few points on the indifference curve that gives Charlie a utility of 150 and sketch this curve with red ink. Now plot a few points on the indifference curve...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x , price of Y is P Y and the consumer income is m. a. Derive and interpret the budget constraint and its slope. b. If slope is -3, how will you interpret it? c. Suppose a government wants to discourage the excessive consumption of X and decides to impose a tax t 1 if someone consume more than X 1 but less than X...
Suppose that a consumer has a utility function given by u(x1, x2) = 2x1 + x2. Initially the consumer faces prices (2, 2) and has income 24. i. Graph the budget constraint and indifference curves. Find...
Suppose that a consumer has a utility function given by u(x1, x2) = 2x1 + x2. Initially the consumer faces prices (2, 2) and has income 24. i. Graph the budget constraint and indifference curves. Find the initial optimal bundle. ii. If the prices change to (6, 2), find the new optimal bundle. Show this in your graph in (i). iii. How much of the change in demand for x1 is due to the substitution effect? How much due to...
10. Janif consumes two goods (Good A and Good B). The utility function is represented as...
10. Janif consumes two goods (Good A and Good B). The utility function is represented as follows: ? = ?(?, ?) = 40?^0.5?^0.5 . The price is good A is $20 and price of good B is $5. Janif earns a weekly income of $600 and does not save. Solve for optimal consumption bundle for Janif using Lagrangian multiplier method. Show all working. 11. Jone consumes apples (A) and oranges (O). His utility function is as follows, ?(?,?) = ?^2?^2....
Sally consumes two goods, X and Y. Her utility function is given by the expression U...
Sally consumes two goods, X and Y. Her utility function is given by the expression U = 2 · XY ^2 . The current market price for X is $10, while the market price for Y is $12. Sally’s current income is $900. a. Sketch a set of two indifference curves for Sally in her consumption of X and Y. b. Write the expression for Sally’s budget constraint. Graph the budget constraint and determine its slope. c. Determine the X,Y...
4. A consumer has income I = 120. She consumes the goods V (Veggies) and M (Meat), which have prices Py = 6 and PM = 4 respectively. (a) Use the above information and plug it into the budget re- striction: PV V + PMM = I. Illustrate it in a figure, with V on the horizontal axis. How does the budget line change if the price of M falls so that PM = 2? Show in the figure. (b)...
Consider a consumer with a utility function u(x1, x2) = min{21, 222}. Suppose the prices of good 1 and good 2 are p1 = P2 = 4. The consumer's income is m = 120. (a) Find the consumer's preferred bundle. (b) Draw the consumer's budget line. (c) On the same graph, indicate the consumer's preferred bundle and draw the indifference curve through it. (d) Now suppose that the consumer gets a discount on good 1: each unit beyond the 4th...
4. Charlie likes both apples and bananas. He consumes nothing else. Charlie consumes x bushels of apples per year and x bushels of bananas per year. Suppose that Charlie's preference is represented in the following utility function: u(x,,Xy)-x,Xy . Suppose that the price of apples is S1, the price of bananas is S2, and Charlie's income is $40. (14 points) a. Draw Charlie's budget line. Plot a few points on the indifference curve that gives Charlie a utility of 150...
3. Michael has preferences over two goods, z1 and r2, represented by the utility function (a) Find the MRS12 associated with this utility function. (b) Use the MRS12, the price ratio, and the budget constraint to find Michael's optimal bundle when m 3000, P50, and 10. for r2. (You will need to calculate the utility at the optimal point in order to do this.) a single graph. Be sure to label the curves, the optimal point, and the axes. (c)...
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